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Here’s another sign that the markets are getting crazy and everyone is chasing after everything

It doesn’t take a rocket scientist to realize that financial markets are full of vitality right now, with the S&P 500 SPX,
+ 0.03%
Thursday ended at its fourth record high for the youngster and a 72% increase from its March 2020 lows. The past 12 weeks have seen the largest equity flows ever, according to Bank of America.

This is another sign. The margin debt tracked by FIRA member firms has increased in the past two months. “We don’t know the total leverage of the stock market,” says Wolf Richter, “but margin loans indicate trends, and we’ve had another WTF moment.” Author of The Wolf Street Blog.

“This rise in margin debt over the past few months is another sign that the markets have gone crazy, and everyone is chasing everything, no matter what it is, whether it is a small stock with a similar name to something. [Tesla Chief Executive] Elon Musk mentioned in a tweet, or if Tesla’s TSLA,
-0.64%
The stock itself, or none of the EV [electric-vehicle] Electric vehicle makers or presumed electric car makers who may never produce electric vehicles on a large scale, or even an old auto maker now touting its investments in electric vehicles, or whatever, including bitcoin BTCUSD
+ 0.71%
– That exploded higher, before falling by 28% in two weeks. “

As the chart shows, sharp spikes in margin debt often precede major stock market crashes.

The good news – for those who invest in the market – is that stock market leverage is an acceleration factor. When stocks are already rising, and investors feel confident, they borrow money to buy more shares, and they can borrow more against their shares because their value has risen. This additional borrowed money chases stocks and thus creates more buying pressure, and raises prices even further, “Richter wrote.

And the inevitable bad news: “Leverage in the stock market is an acceleration factor on the way down, when stock prices are already falling and brokers issue margin calls to their clients who then have to sell the shares to stay in compliance, resulting in a bout of forced selling that sells many Leveraged investors before margin calls to avoid having to sell at the worst possible moment. “

Hype

Intel INTC,
+ 6.46%
It fell 4% in pre-market trading, after rising 6% on Thursday when it released stronger-than-expected results about 10 minutes before the close of trading. Next CEO Pat Gelsinger suggested Most of its manufacture will remain in-house, Instead of relying on the services of an external foundry. The chip maker said it released the report early After discovering a breakthrough to view its results.

IBM’s IBM,
+ 1.21%
Shares fell 7%, After the tech service giant reported a 30th revenue drop in 34 quarters.

GOOG alphabet,
+ 0.23%
Google Threatened to shut down search service in Australia On a proposed law imposed by the social media platform Facebook FB,
+ 2.02%
To pay publishers.

Incoming Biden administration officials have been playing down expectations about controlling the COVID-19 pandemic with Jeff Zents, head of the effort, saying:What we inherit is much worse than we imagined.The White House said President Joe Biden will sign executive orders to extend federal feeding programs and make clear that workers can collect unemployment benefits while refusing to work in unsafe conditions.

The country most advanced in vaccination efforts, Israel, is still so Struggling to control coronavirus cases. Listed European airlines including Ryanair Holdings RYAAY,
-2.04%
It fell, after British Prime Minister Boris Johnson and Home Secretary Priti Patel did not repeat earlier assurances that the UK would return to normal by April, with speculation the country was It will start paying people with the virus to stay home.

The economic calendar features current home sales and fast reading of PMIs. Those PMIs showed that conditions in the Eurozone and UK worsened in January.

market

ES00 US Equity Futures,
-0.69%

NQ00,
-0.55%
It was signaling a sharply lower start, with futures on the Dow Jones Industrial Average YM00,
-0.78%
Loss of more than 200 points. Crude Oil Futures CL.1,
-2.56%
GC00 gold,
-1.26%
It also fell, while the yield on the 10-year TMUBMUSD10Y Treasury fell,
1.089%
It was 1.09%.

The graph

The general rule is to flip the VIX,
+ 9.76%
It rises when stocks are down, and falls when stocks rise. This is clearly not the case now. The investment institute of the hedge fund giant Man Group says there are notable exceptions to this rule. “When volatile sectors dominate the index, we get more instances of simultaneous increases in stock markets and volatility, particularly during the technology bubble in the late 1990s. In fact, we see a similar combination to the S&P 500 today.”

tweet

Check out the amazing “Hamilton” song about Treasury Candidate Janet Yellen. Complete words here.

Random readings

comedian Dave Chappelle has contracted the CoronavirusDays after seeing her with talk show host Joe Rogan, singer Grimes, and Musk, who had previously contracted the virus.

Speaking of musk, The latest release of SpaceX Scheduled at 9:24 a.m. ET, weather permitting.

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