Submitted by Mark Hanna
Courtesy of MarketMontage. View original post here.
Courtesy of ShortSideofLong blog we have one very interesting chart. Margin debt is expanding at a “hockey stick” clip very similar to what was seen in 2000 and 2007. Obviously we know how those two periods turned out but if we use the 2007 parallel one doesn’t know if this is January 2007 or October 2007. And that is if you assume patterns are going to repeat – there is no Fed with any inkling to tighten unlike those those time frames where it was either happening or in discussion.
Bigger picture forget what everyone is “saying” about being cautious, people are jumping on top of each other to borrow to buy stock.
Another example of watching what people do, not what they say (“oh everyone is so bearish!”) – short selling exposure in the S&P 500 is at a record low. The Bernank has convinced everyone it’s his market and just play along.
Short sales in the Standard & Poor’s Composite 1,500 Index fell to 5.6 percent of shares available for trading in February, down from a record 12 percent during the credit crisis and the lowest ever in data compiled by Bespoke Investment Group and Bloomberg starting six years ago.
Disclosure Notice
Any securities mentioned on this page are not held by the author in his personal portfolio. Securities mentioned may or may not be held by the author in the mutual fund he manages, the Paladin Long Short Fund (PALFX). For a list of the aforementioned fund’s holdings at the end of the prior quarter, visit the Paladin Funds website at http://www.paladinfunds.com/holdings/blog
