Even though the last update on the blog was last week, the recent tempo of my travels as well as long days have made it feel like an eternity. Good food, good drinks and very long and late nights… one couldn’t ask for a better way to spend time.
A quick update today. First of all I will share with you just some of the reading I have been doing while on the road:
- Are Mutual Funds Preparing For A Correction? (The Blog of Horan Capital Advisors)
- Commodities Moving Down into the Midyear Correction (Kitco Commentary)
- Credit spreads are very tight (Calafia Beach Pundit)
- Weekly Market Summary (The Fat Pitch)
- 5 Things To Ponder: Sell In May & Go Away (Lance Roberts & Advisor Perspectives)
- GMO: The Stock Market Looks Irrationally Exuberant (Business Insider)
These are just some of the readings I’ve been going through over the weekend. While I do not necessarily agree with everything every article states, one major theme here is the overvaluation in the US equities. Now, as we all know, this is nothing new. It is only a question of how much longer does it last, before the bear market returns…
Chart 1: Have the equity speculators started their de-leverging process?
Finally, here is a quick chart I want to share with you. At two of the previous stock market peaks (2000 & 2007), investor leverage peaked out ahead of the actual equity indices. In 2000, during the infamous tech bubble days, leverage peaked out in March 2000 while the S&P 500 peaked out in August. During the pre-days of subprime troubles, investor leveraged peaked out in July 2007 while the market itself topped in October 2007.
Presently, in the month of March, we saw a first decline in leverage for a long time. Could this be a signal that the investor leverage peaked out in February 2014? The market, on the other hand, still keeps pushing higher and remains very close to record highs. Déjà vu anyone?