Hedge Funds Borrow the Most Since 2007 to Purchase U.S. Stocks

[achilles28]

Quote from DeeDeeTwo:

The idea that Bernacke that kind of control...
Is completely insane...
And exactly why guys like you always blow-up.

The Fed will eventually be overwhelmed my market forces...
The longer Ben can dance on a pin...
The worse the fallout will be.

Quote from Alex_in_Oz:

The idea that a Reserve Bank of any country can stop a market correction or crash is absurd.
The most the US Federal Reserve can do is to get a little co-operation from Brussels and Tokyo and to a limited extent Beijing.

The crash (like in 2008) will happen quite soon and will take out a hell of a lot of countries and multi-nationals.

The Federal Reserve has complete authority to monetize troubled assets and quantitatively ease, into perpetuity. As Denner mentioned, their actions over the last 3 years prove the extent of their resolve to do just that. Further, the US consumer is in recovery mode and financial balance sheets are stronger. That's not to say we couldn't get a 15% sell-off. But that if we did, it would not be supported by fundamentals, and swift intervention by Central Banks would result. You both are rather clueless. The Federal Reserve has total ability to reinflate prices, directly or indirectly, through discount window rates, prime rates, QE and TARP programs. That's exactly what caused the last 4 bubbles.

The original topic infers hedge fund margin levels are positively correlated to the likelihood of a market collapse. If the repo market spikes and institutional money is forced to liquidate to meet calls, the FED will step-in to avert a panic. That's what you're missing. The entire recovery was a ~6 Trillion dollar process of restoring faith in banks and markets. I see no evidence they want to throw that away.

 

[BlackBison]

Quote from dtrader98:

FWIW, at least from my perspective, I don't recall too much complacency just before the top...

Well perhaps I used the wrong wording saying 'complacency'. You are right, there was a fair bit of talk about banking problems, but no real fear or agreement that it could get really ugly amongst most traders.

I suppose what I meant was people thought a correction might come, but totally underestimated its potential magnitude, particularly in the financial stocks.

My point remains valid though, the sentiment is completely different now to then..

 

[fad2171]

Looks like they want to push mkt higher into quarter end. Watch the euro . As it goes up so does mkt. I would think ounce QE2 is over market will correct down. I would not fight the long side though. There will be plenty of time to short them. The market will tell you. We are very close to year highs . Do they go theough or do we have lower high . Your guess is as good as mine

 

[fanews]

1% interest is dirt cheap. even at 4% is still cheap

dividends is 3% minimum p/e is 10-15

Quote from ASusilovic:

Feb. 24 (Bloomberg) -- Hedge funds increased their net leverage in January to the highest level since October 2007, as they took advantage of record-low borrowing costs to bet that the U.S. equity rally will continue.

Debt at margin accounts at the New York Stock Exchange minus cash and unused credit from margin accounts climbed to $46 billion, according to data released by NYSE yesterday. Hedge funds had $290 billion of debt from margin accounts in December, the largest sum since Lehman Brothers Holdings Inc. collapsed in September 2008.

“It makes a lot of sense given the low cost of borrowing and some equities’ valuations,” said Patrick Armstrong, who helps manage $356 million in multiasset strategies at Armstrong Investment Managers LLP in London. “There is a capital- structure arbitrage to be made by buying stocks with leverage.”

http://noir.bloomberg.com/apps/news?pid=20601087&sid=a.zOaZV1dx10&pos=5

Murphy´s law: this will end in disaster! I think uncle helicopter Ben and his braniacs forgot abou geopolitics when they thought about their idiotic plan to "inflate" not only the US but every other country out there, too. My regards, Ben, you are the WORST central bankster ever born!

 

[nutmeg]

Quote from nutmeg:

NYSE Reports Third Highest Net Margin Debt Amount Ever

Total margin debt jumped by a whopping $21 billion from $289.6 billion to $310.3 billion, the highest it has been since July of 2008.

"The NYSE has released its monthly margin debt update for March. Not surprisingly, with everyone, and yes EVERYONE, chasing nothing but levered beta, margin debt surged to a fresh 3 year high at $315.7 billion, the highest since February 2008."

 

[fad2171]

Never say never. This market is climbing a slippery slope.

 

[jlancaster]

Quote from ASusilovic:

“It makes a lot of sense given the low cost of borrowing and some equities’ valuations,” :

Still a good idea even with the dollar's weakness? I believe now is no the time to play around with the dollar. They better make some good money out of it.