Tracking "margin debt"

[markopolo]

I track news on margin debt.

Lately, I seem to get an email update everyday. Margin debt is at record levels.

It's all good until rates rise or the debtors get uncomfortable.

I track it because I think movements in margin debt indicate market sentiment.

I can't help but think a "bust" is near but, for the life of me, can't figure what the catalyst could be.

[Mike]

Originally Posted by markopolo

I track news on margin debt.

Lately, I seem to get an email update everyday. Margin debt is at record levels.

It's all good until rates rise or the debtors get uncomfortable.

I track it because I think movements in margin debt indicate market sentiment.

I can't help but think a "bust" is near but, for the life of me, can't figure what the catalyst could be.

Oil prices dropping rapidly, or steadily, over a prolonged period of time? Probably a good indicator that
global demand is dropping, and that's usually the best indicator of an impending meltdown. If the price
stays high, there is demand (backed by the ability to buy it, which implies someone's economy is still doing
well) somewhere, and that means money is still moving somewhere.I assume you meant a global reccesion
like in 2008?

[markopolo]

I'm think more along the lines of stock market correction.

It more or less keeps going up even though food and fuel etc. increases are noticeable and must be sucking money out of the system. If you are on a fixed income you're getting hit hard.

[Mike]

Originally Posted by markopolo

I'm think more along the lines of stock market correction.

It more or less keeps going up even though food and fuel etc. increases are noticeable and must be sucking money out of the system. If you are on a fixed income you're getting hit hard.

If you mean the TSX keeps going up, then yes, because we are a commodity based GDP as countries go.
Our stock market does well when the world needs our minerals and the price of oil is high.
When the price of oil rises, stuff in our country tends to follow. Our "petro" dollar and the TSX in particular
mirror the price of oil. Find a line chart of the TSX, and a similar time frame line chart of the price crude
oil (or West Texas Intermediate crude). Overlay them, and there aren't a lot of noticable gaps between the
2 lines. It stands to reason that when/if oil falls, logically, our market will feel the effect and follow, in my
opinion. It will likely be soon, the drop in oil prices as I think we're approaching the breaking point for normal
demand.
I am on a fixed income, although oddly enough, my fixed income is affected by the price of oil because I
chose to invest in it, among other things. And yes, I got hit hard 2.5 years ago, like many others, and I
am feeling the pinch of higher prices. The reason for a lot of the price increases aren't necessarily out
of our control, as a lot of the increases in our everyday expenses are mostly increases in the taxes we pay.
However, I've been fortunate in that the overall price increases, are offset to some extent by the investments
I hold. As a footnote don't ever expect a political party to do anything effective regarding the price of oil.
They make so much taxing it, like tobacco, they have no vested interest in doing anything about it when the
price jumps up, just like the oil companies.

[Mike]

FYI, Goldman has issued a downgrade for Canadian stocks in general, as they see
a pull back in the price of oil. So far, things appear to be playing out that way, since
oil has pulled back about $10/bbl since yesterday, with a mirror pull back in the
TSX/TMX and our C$.
GS apparently recommended selling any Canadian positions, to their American clients.

[markopolo]

Interesting. GS is powerful. Scary actually.

.............

Re: oil and gas etc........ New Brunswick just increased the tax on gas by 3 cents per litre. NB GDP will certainly not grow because of that.

[Mike]

Our gas prices just topped $1.30/L ($4.94/USgallon) and the US average price is around $1/L ($3.80/USgallon)
so we're delaying our planned trip in a couple of weeks (sorry Davydd, no Tombstone) to see what happens.
Maybe if/when the economies of North America begin to contract under the weight of OPEC, someone will
do something, or there will be a waning demand sell off of oil and the price will come down (and the TSX and C$ too).
I hate to let the price of gas determine our travel plans, but that's how it is for us right now. The same trip
last year would have cost 1/2 to 2/3 of today's price for fuel.

[markopolo]

For anyone interested:

http://seekingalpha.com/article/268132- ... n-t-wealth

[Mike]

Originally Posted by markopolo

For anyone interested:

http://seekingalpha.com/article/268132- ... n-t-wealth

Honestly, I'm not sure what his point is except maybe that some margin traders are getting
into an increasingly risky market in commodities? I think that's a generally accepted tenet. It's often
a game of chicken at the highest levels with huge margin buyers seeing who can wait the longest
and make the most, before someone bails and the prices drop suddenly when someone pulls
the trigger on a huge sell.
I still believe basic commodities are wealth providing there's a market for them. Canada is a
commodities based/driven market. As long as there's a demand somewhere, we're OK. If there
isn't, we're still OK, because economies tend to be cyclical and eventually when they next improve,
based on their own internal drivers, the demand for our stuff will come back.
The US (which I believe he was talking about, reference his gas price numbers) isn't necessarily
commodity driven as much as we are except food and eventually natural gas, when oil declines
as a worldwide energy source. They could be a bigger oil producer, but politics is making that
difficult for them right now. Also, his examples of charts may be sort of related to the Greeks
considering dropping the Euro as their currency, which has caused a run on US$ over the last couple
of days driving some things like oil and gold lower as the US$ strengthens as people historically
buy them for safety (why?) when another currency is threatened. Copper might just be trending
lower based on a slowing Chinese economy which is supposed to be artificially slowed by their
government now that they finally "get" that too much inflation is counter productive.
I'm surprised he didn't note the drop in silver and the rise in gas and oil stockpiles due to a 4th
consecutive week of reduced demand for both in the US and elsewhere. I know I'm driving less.