S&P 500 and Margin Debt Level

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Although everybody tells us that there is still a lot of money on the sidelines and retail investors seek for a dip to get on board, the highly leveraged market is sending quite a different message.

The margin debt level hits again a record high as it last did in 2007. Is this time different? Perhaps, because central bankers are desperately trying to engineer asset bubbles. Does the creation of asset bubbles make sense? Opinions are divided, while central bankers think it's good for the economy, critical market observers think it's only good for the wealthier people and the financial industry, but bad for all the others. How is this going to end up? Difficult to say, but asset bubbles ultimately always tend to burst and to unlash strong deflationary forces, and this again is said to be bad for the economy.

Central (bank) planning works ... until it doesn't.

Martin Ruchti, MBA

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