Record Level Of Record Levels Reached

by: Larry MacDonald

Almost weekly it seems we get news of some financial series reaching a record level. I’m tempted to compile a Guinness Book of World Records for financial markets and call it the Investor’s Book of Financial Extremes or something like that. Here are 16 records (or near records) that could be included:

1. S&P 500 earnings have registered 13 consecutive quarters of double-digit growth, matching the postwar record
2. The global, inflation-adjusted return on equity [ROE] has reached a record high of 12% (BCA Research, sub. req.)
3. Non-financial corporate profits as percentage of GDP have reached new highs, near 14%, in the U.S. (BCA Research, sub. req.)
4. The spread in yields between U.S.. high-risk bonds and treasuries is at historical lows, close to 340 basis points (National Bank)
5. The “cost of insuring debt against default in the market for credit default swaps” recently fell to record lows, as highlighted by the decline in the iTraxx index to 22.75 basis points (Financial Times of London, sub. req.)
6. The Volatility Index [VIX], often called the investor’s fear gauge, closed at a historical low of 9.86 in late November
7. The median price of an existing single-family home in the U.S. declined 3.5% over the year to October, the largest drop ever (Northern Trust)
8. The dollar volume of single family home sales as a percentage to GDP reached a record high of 16.3% in 2005, almost double the median
9. House prices have outpaced inflation by 35% in the five years to 2005, the fastest rate since recordkeeping began in 1966
10. U.S. residential construction hit an all-time high of 6.3% of GDP in 2005 and remains more than two standard deviations above the 45-year mean (BCA Research, sub. req.)
11. The U.S. trade deficit, near 7% of GDP, is at record levels
12. The CRB metals index is in record territory, currently at 740
13. Stock markets recently hit all-time highs in numerous countries including, U.S., Canada, India, Hong Kong, Australia, New Zealand, Singapore, Indonesia, Spain, Mexico, and South Africa
14. Short-selling interest on the Nasdaq stood at a record 7.4-billion shares as of mid-(Wall Street Journal)
15. The global dividend payout ratio is less than 35%, close to a record low (BCA Research, sub. req.)
16. There was a record level of US$116 billion in buybacks for S&P 500 companies during the second quarter (S&P analysts)