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Maybe It's Different This Time

 

 

 

 
 

 

.....but be careful if it's not.

I've worked in the derivatives trading business since the late 90s when Glass Steagall was repealed and banks were incented to find ways to layer leverage. I have seen leverage work wonderfully and I have seen men carted off the trading floor on stretchers because of leverage (the hot dogs and Italian beefs for lunch everyday also contributed). Most people do NOT appreciate the power and pain of leverage until it's just a little too late and then they start to bargain with themselves (anxiety/denial). I've done it myself.

It's next to impossible to time the market consistently. I have no idea if or when the Equity markets will take a breather, but if I were a gambling man, I would say we're a lot closer to the top than the bottom and if I were a prudent/judicious type.....I would consider HEDGES.

In my opinion, Central Banks from DC to Frankfort from Shanghai to Tokyo have incentivized leverage and the reach for yield. It masks anemic global "growth". It allows them to remain in power which is a tremendous motivator. Or maybe I'm just a cynic.....

We know there is about $400 BILLION in MARGIN DEBT at the NYSE. That's the highest number on record. Margin debt is up 4.7% month over month. Margin debt has DOUBLED since the beginning of 2012 (following Eurozone risk flare and US debt downgrade) from $267 Billion to over $400 now.

I'm not saying we're at the top. Picking tops is a fools errand (which I've tried to do on numerous occasions). However, at the risk of being the Boy Who Cried Wolf...... leveraged returns make for an unstable foundation. This dance hall is incredibly crowded and the DJ just realized he's being paid with a credit card. Things can get weird when the music stops.

Kevin Davitt

Global Execution and Futures/Options Broker

621 S. Plymouth Ct. Floor 1

Chicago, IL 60605

Direct: 312-870-1520

Cell: 773-732-5197

Fax: 312-275-8123

AIM: kpdavitt13

kdavitt@rcmam.com

rcmassetmanagement.com

Risk Disclaimer: This information is not to be construed as an offer to sell or a solicitation or an offer to buy the commodities and/ or financial products herein named. The factual information of this report has been obtained from sources believed to be reliable, but is not necessarily all-inclusive and is not guaranteed to be accurate. You should fully understand the risks associated with trading futures, options and retail off-exchange foreign currency transactions ("Forex") before making any trades. Trading futures, options, and Forex involves substantial risk of loss and is not suitable for all investors. You should carefully consider whether trading is suitable for you in light of your circumstances, knowledge, and financial resources. You may lose all or more than your initial investment. Opinions, market data, and recommendations are subject to change without notice. Past performance is not necessarily indicative of future results. This report contains research as defined in applicable CFTC regulations. Both RCM Asset Management and the research analyst may have positions in the financial products discussed.