Into the 2000 and 2007 tops there were very sharp spikes up in the margin debt. We have the same situation today as the debt has spiked up sharply since the middle of last year. The other two major tops had the margin debt peaking before the final high in SPX. Can we count on that again? I don't know if it safe to assume that or not. The global economy was clearly not in recession at the other two tops. It certainly looks like it most likely is today. People like to say this is a hated rally, but clearly people have grown to love it now. This is not based on what people say, this is based on what people do. This next chart shows it even more clearly I think.
Only in the euphoric days of 2000 were credit balances lower then this. I don't think we will reach that level from 2000 and we are already below the level from 2007. The market is now on borrowed time (and money) and another crash is coming, QE or not. The only question is when.
Bob
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