There is a saying that you don’t ring bells at the top.
It’s not really true. Every time the market forms a major peak, at least in the last 15 years, there are usually a preponderance of signs of excessive speculation and leverage.
Today we are seeing bells ringing throughout the markets.
For instance, today, we have:
1) Corporate debt is at 2007 peak levels.
2) Investor bullishness is at extremes not seen since the 2007 top.
3) Margin debt (money borrowed to buy stocks) is closing in on its record high.
4) Over 70% of household net worth is based in financial assets. As ZH has noted previously, every time this has happened historically, asset prices have crashed soon after.
5) The Bank of International Settlements and the IMF have both warned of excessive risk taking and market fragility.
6) Market volume is at an absolute trickle, with most volume coming from HFT firms.
Aside from this, we have countless examples of the “smart money” preparing:
1) Billionaires are sitting on record amounts of cash.
2) Warren Buffett is sitting on over $50 billion in cash.
3) George Soros has taken out a record put position to profit from a market collapse.
4) Carl Icahn has warned of a “big drop” coming in stocks.
5) Jeremy Grantham has commented that we are in a “fully-fledged equity bubble.”
6) Corporate insiders are selling stock at a pace not seen since 2000.
7) Financial institutions as well as hedge funds have been net sellers of stocks since 2014 began.
There are literally bells everywhere today. Does this mean that the market will take a nosedive this week? Not necessarily. Tops can take much longer to form that anyone expects.
However, there are clear signs of excessive speculation, leverage, and the like. And the smart money is heading for the exits.
Are you?
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