A FLIP in the Stock Market JUST Happened

whoa we finally finally folks just had a

rotation in the market i've been waiting

for this to happen

waiting for this to happen because i was

starting to get nervous about this

the leverage can't keep going up in the

market

like people have to pay down their debt

they have to pay down their margin

and if you see leverage continue to go

up up up up you're basically just using

debt funny money to inflate a big bubble

bubble bubble but take a look at this

finra margin which has exploded to

record highs i was worried we were going

to go to a trillion dollars soon it ran

up to 882 billion dollars in june

has finally for the first time since

march of 2020

actually gone

down

this is a big deal

in fact here this is what 2020 looked

like

so you can see right here in january

2020 we had 561 billion

then we had uh it once february came

around people started paying down their

margin a little bit you could see that

here february 2020 you actually went

down in margin

margin outstanding so remember margin is

debt on stocks

then you went down to

479 in march 2020 but look at this once

we hit the bottom of the market people

literally just kept piling on debt 524

552 584 613 uh 654 650 or 645 and so on

and so forth you can see it was

literally just straight up to 788

798 then we crossed 800 for the first

time ever

ever

and uh now we're all the way up we were

almost at 900

billion dollars in margin debt

outstanding which is absolutely crazy

now what's also uh

crazy is that we right now we still

stand substantially higher with margin

debt than where we used to stand take a

look at this i mean 561 was before the

pandemic 561 billion dollars of debt

now we're sitting at 844. we're

substantially higher in the amount of

debt we have

but we finally have a flip now i've been

tracking this chart for a while but in

fairness i saw this headline and i

didn't even click on it the first thing

i did was go straight to the finra

statistics but this is very very good

the last thing you want to see is debt

going up up up especially if you're

concerned about a bubble investors in

the us have started to dial back their

use of leverage since the for the first

time since financial markets were

rattled by the coveted pandemic

investors bar we just saw the numbers

here separate data from goldman sachs

which which runs one of the largest

prime brokerages in the world showed

that investment banks hedge fund clients

had cut

both net and gross leverage in recent

weeks that's awesome

morgan stanley has also reported long

short equity

hedge funds that trade through its

that trade through it reducing leverage

we've seen the same thing in crypto that

this is really good like this is a

perfect healthy transition for market

where you kind of have people hoarding

cash

now we've seen a little bit of of

placing of cash during this week and we

wonder how long it can last but we've

got record uh cash balances at banks uh

you look at

uh here fed reverse repo

st louis right here let's just look at

the record cash balances really quick

let's see what they stand for at now

you've got record cash balances at banks

investors have have record amounts of

money and they're paying off debt yeah

look at this banks are still at record

highs we're now at one uh we're now at

1.1 trillion

dollars in reverse repos the highest

we've been at here on wednesday 1.147

banks just have so much cash that's all

this this is just a line of basically

how much extra cash banks have

but

anyway this debt payoff happening at

brokers is very healthy you want this to

happen in uh in an economic recovery

all right let's see here more

comprehensive data from the federal

reserve on hedge fund leverage not yet

available interactive brokers which

serves 1.5 million customers disclosed

last month that margin balances among

its clients had declined two percent in

july from the month before charles

schwab said that margin balances

rose

by the smallest space

since the retail broker began disclosing

them

good see this inflection point right

here this is nice they put it on a nice

little chart here very very good uh this

is healthy for the economy unless of

course it's it's a it's a sign and

people are like that's it they see the

crash coming and they want to get out of

leverage

i'm less inclined to believe that

although you know i think that that has

30 percent merit i think it's more 70 is

more like hey we're kind of at pricey

prices right now and uh things have been

trading somewhat sideways

maybe let's uh let's pass some debt

which is great

maybe you also get some profit taking

towards the end of the year but but this

is great

okay the company was

all right this is the same large hedge

funds kept their stake in chinese

companies the reduction of borrowing

follows a stellar run for u.s stocks

well not for all stocks

the big loss of archagos that was a

leverage disaster fed reserve warned in

may that the tools it and other

regulators had to gauge hedge fund

language

may not be capturing important risks

yeah that's always a big problem

trading activity has been moderated in

recent months

and there was a certain level of

aggressiveness in trading earlier this

year that made people more willing to be

take on leveraged bets that's also

possible that maybe people are just

trading less right now i mean right now

it's just like we have a a herd of

animals going from from like plot to

plot to plot to go buy uh to buy stocks

at um

various different moments but anyway uh

yeah

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