The chart comes from a long article in Forbes. The article has these words:
Low interest rates encourage stock speculators to borrow money from their brokers in the form of margin loans. These speculators then ride the bull market higher while letting the leverage from the margin loans boost their returns. This strategy can be highly profitable – until the market turns and amplifies their losses, that is.
There is a general tendency for speculators to use margin most aggressively just before the market’s peak, and the current bull market/bubble appears to be no exception. During the dot-com bubble and housing bubble stock market cycles, margin debt peaked at roughly 2.75% of GDP. In the current stock market bubble, however, margin debt is nearly at 3% of GDP, which is quite concerning. The heavy use of margin at the end of a long bull market exacerbates the eventual downturn because traders are forced to sell their shares to avoid or satisfy margin calls.
…I’m from the same school of thought as billionaire fund manager Jeff Gundlach, who believes that the Fed will keep hiking interest rates until “something breaks.” In the last economic cycle from roughly 2002 to 2007, it was the subprime mortgage industry that broke first, and in the current cycle, I believe that corporate bonds are likely to break first, which would then spill over into the U.S. stock market
…The purpose of this report is to warn society of the path that we are on and the risks that we are facing. I am not necessarily calling the market’s top right here and right now. I am fully aware that this stock market bubble can continue inflating to even more extreme heights before it pops.
Read the entire piece here
More to read on 2008
+ Lehman Brothers collapse: The so-called ‘Lehman moment’ was more symptom than cause. Click here.
+ CRISIS AND CONSEQUENCES
The Recovery Threw the Middle-Class Dream Under a Benz. Click here.
+ How the 2008 Crisis Changed How We Save and Invest
“The scars of 2008 are still very raw for millions of people today,” says a new report from online investment firm Betterment.
Nearly half (47%) of the survey’s 2,000 respondents – 1,602 of whom were at least 18 in 2008 – were invested in the market when the crash hit and it hit hard: 93% were affected and 80% said they lost money in the market. Even though the S&P 500 has grown 80% since March 2013, 65% of those who were affected by the crash and the Great Recession that followed say that they have not fully recovered even today.
The Bottom Line
The 2008 collapse created potentially permanent scars and negative attitudes towards Wall Street. This mistrust undermined trust in the markets and people’s willingness to invest in them – especially among observers who weren’t investors when the crisis struck. Needless to say, many non-investors lost jobs and homes and other assets even if they had no money in the stock market.
Overwhelmingly (85%) and equally, investors and non-investors worry that the next 10 years will bring another financial crisis. But for the moment, there are some bright spots: Young adults who are new to the market seem to be more open to investing than other groups – as the group that must begin to build wealth, this is crucial. Those who were investing in 2008 and stuck with it despite their losses recovered, while those who were not invested then are still shying away and continue to be distrustful of the market.
Read more here.
Apple will intro pricey new phones at 1PM ET
Perhaps ones costing over $1,000. Apple has discovered that its pricey, high-margin phones sell very well. Nice having devoted customers.
Five things I especially like about my iPhone:
+ Shared photos. Photos of grandkids stream at me daily. Much cheaper than visiting them. (Joke.)
+ FaceTime. Videoconferencing with the grandkids. Much cheaper than visiting…♥
+ The camera. Susan and I did our first selfie movie. Will be used at an upcoming family bat mitzvah. Wonderful quality. Easy as pie.
+ The Apple App Store with its wonderful apps, like Waze, Kindle, Dark Sky, WhatsApp, Turo, JPM check banking, and Fidelity.
+ Appreciation in Apple stock has paid for all my iPhones many thousand-fold. Here’s Apple over the last ten years. Nice chart.
If you think things aren’t getting better, you’re wrong.
Look at this. These things are effectively miniature hard drives.
You can take and store thousands of photos on this tiny card. Just don’t lose one — as I did.
Back it up to another card or a laptop. Buy the SD card here.
This is how difficult it was to move a 5 megabyte hard drive in 1956. The little SanDisk SD card above holds 12,800 times as much information as the 5 meg drive in the picture. Back then IBM wouldn’t even sell it to you. You had to lease it for $3,200 a month.
Hurricane Florence is battering insurance stocks, like TRV
Florence is on track to be one of the biggest hurricanes in U.S. history, with winds expected to accelerate to 155 mph and a storm surge up to 15 or 20 feet. Already 1.5 million people have been evacuated from the Carolina coast. This is a monster storm. It will have a devastating impact on the people who live there. There will be massive flooding for as far as 50 miles inland.
You can’t trace this intense storm to global warming. But it seems insane for our Administration to deliberately increase carbon emissions from coal burning plants and automobiles. To benefit who?
Read more on Hurricane Florence here. Stay away from insurance stocks.
I love puns. So do these guys
See more here.
We’re now in the ten days between Rosh Hashana and Yom Kippur
+ The Reform Rabbi
He’s so reform, he doesn’t work on holidays like Rosh Hashana and Yom Kippur.
+ The Jewish Divorce
A New York City judge is presiding over the divorce proceedings of a Jewish couple.
When the final papers have been signed and the divorce is completed, the woman thanks the judge and says, “OK. Now I have to arrange for a Ghet.”
The judge inquires what’s a ‘Ghet’.
The woman explains that a Ghet is a religious ceremony which is required under the Jewish religion in order to receive a divorce that is recognized by the Jewish faith.
The Judge says, “You mean it’s a religious ceremony like a Bris?”
“Yes, it’s sort of similar to a Bris, only in this case you get rid of the entire pri*k.”
Harry Newton, who notes yesterday was up as much as today is down. Isn’t volatility wonderful? Just don’t watch it every day. Don’t spend yesterday’s paper gains today.
