It is on! The panic is on! The stock market is entering a panic phase and it will now move very fast through the markets. The markets are leveraged like no other time in history and when greed turns to fear and the waves of selling start, fear will dominate and the panic engulf the market at a speed never witnessed before.
Margin debt is an all time high, hundreds of times worse than 1929, the Federal Reserve easy credit policies and record low interest rates have fueled the greatest stock speculation of all time. Margin debt is now tens of billions higher than the 2007-9 crash, hundreds of billions higher than the 2001 crash. Compared to 1929, the amount of money borrowed to buy stocks is infinitely higher. The crash will be infinitely worse and it will take out the last remnants of the American Republic.
Margin debt is hundreds of times higher than 1929, and thus when the drop comes it will become a total route, as speculators are forced into sell to meet margin calls, including selling other assets like precious metals.
- In the next chart, margin debt is highly correlated to the SP500 stock average. As you can see the all time high of stocks in 2013 is being fueled by credit, not the economy. The stock market is in a bubble cause by a cheap credit, when the bubble started to liquidate in 2007-9 the margin debt fell with the stock average in perfect unison.
The last stock crash that made headlines was Oct 19th, 1987. A 22% drop today with the market at 15,800 computes to 3500 points on the Dow Jones Industrial Average. When you see a drop of 500 to 1000 points don’t worry, a bigger drop is coming.
The stock market was reaching an exponential limit in late 2013 and early 2014, a few mathematicians are aware of the limit pattern that is forming. The pattern peaked and now the crash has started.
- As the crash waves start ocurring, at first you’ll start seeing a few larger than normal down days, then as the herd starts to realize that the stock market has reversed its upward exponential climb, an overwhelming feeling of panic starts to creep into the beings of the greedy speculators.
What is going to happen next is a no brainer, the stock market is going to crash exactly like the crash of 2009, only faster and deeper.
Already a crash pattern is forming in many individual stocks, like Sallie Mae, are student loan payable?
Because of record margin debt, the crash will trace downward in less time, as this chart illustrates the 2009 crash was steeper than the 2000 crash:
Count your lucky stars to witness the upcoming crash of 2014, it will be a thing to behold, as billions of paper profits are wiped out in seconds.