Wednesday, April 2, 2014
Gold Nearing an Important Inflection Point
The market is working lower in the range noted within the rectangle with the -DMI back above the +DMI indicating the bears are back in control of the market. The daily chart is not, as of yet, reflecting a trend lower, just a move back down within a broad range. (more)
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Chart of the Day - RCS Capital (RCAP)
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Tuesday, April 1, 2014
Margin Debt at Highs: Leverage Spikes, As Does Risk Of Crash
Margin debt is a crummy predictor of a stock market crash.
But after it starts spiking, it has a bone-chilling habit of peaking
right around the time stocks crash. In the last fifteen years, it spiked
three times: during the final throes of the bubbles that started
imploding in 2000 and 2007; and now.
In February, margin debt jumped by $14.5 billion to a new all-time crazy record of $465.7 billion. In the last seven months, it soared $82.8 billion. It’s now 22% above the prior all-time crazy record of $381.4 billion set in July 2007, during the glorious moments before the whole construct came tumbling down.
Are we there yet?
Margin debt started spiking in January 1999 and in March 2000 hit a record of $278.5 billion, or 2.66% of GDP.
That very month, stocks began their epic collapse, which, after 28
months of cliff dives and sucker rallies, left the S&P 500 down 45%
and the Nasdaq nearly 80%!
READ MORE
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In February, margin debt jumped by $14.5 billion to a new all-time crazy record of $465.7 billion. In the last seven months, it soared $82.8 billion. It’s now 22% above the prior all-time crazy record of $381.4 billion set in July 2007, during the glorious moments before the whole construct came tumbling down.
Are we there yet?
READ MORE
A Bull Market In Nickle?
And now, the ripples have spread far beyond the energy market to other commodity markets.
You see, the threat of Western sanctions against Russia has put renewed focus on a base metal that’s been in the doldrums for years… nickel.
That’s because the world’s largest producer of the metal, which is used to make stainless steel and nonferrous alloys, happens to be Mother Russia’s Norilsk Nickel (NILSY). NILSY mines a whopping 17% of the world’s nickel each year. (more)
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Canadian banks leading race to financial pain
The contest to entice every last warm body to reach for the most over-valued real estate in the world has reached a new fevered pitch in Canada. Here is a direct video link.
A little appreciation of math goes a long way here. As shown in this Bank of Canada chart the average 5 year mortgage rate has never been less than 4% and on average has been in the 8% range since 1951. So pushing 5 year mortgage rates to 2.99% is a desperate effort by banks to push more borrowing on to Canadians who are already struggling under the highest debt levels in the history of the country; and significantly higher than the US faced at the peak of their credit bubble in 2006.
When rates finally begin to normalize, they can only trend higher as borrowing costs revert back toward the long term mean. The chart below gives a glimpse of what that will look like for the current average Canadian home price of $406,000 with a 5% down payment. A monthly payment at a rate of 2.99% becomes 29% more expensive at 6% and 50% higher at 8%.
On top of that, the coldest winter in 25 years has now locked in natural gas rates 40% higher for households beginning April 1. See: Enbridge’s 40% gas hike approved by regulators.
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A little appreciation of math goes a long way here. As shown in this Bank of Canada chart the average 5 year mortgage rate has never been less than 4% and on average has been in the 8% range since 1951. So pushing 5 year mortgage rates to 2.99% is a desperate effort by banks to push more borrowing on to Canadians who are already struggling under the highest debt levels in the history of the country; and significantly higher than the US faced at the peak of their credit bubble in 2006.
When rates finally begin to normalize, they can only trend higher as borrowing costs revert back toward the long term mean. The chart below gives a glimpse of what that will look like for the current average Canadian home price of $406,000 with a 5% down payment. A monthly payment at a rate of 2.99% becomes 29% more expensive at 6% and 50% higher at 8%.
On top of that, the coldest winter in 25 years has now locked in natural gas rates 40% higher for households beginning April 1. See: Enbridge’s 40% gas hike approved by regulators.
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