Kudos to MMs

"Hedge Funds Borrow the Most Since 2007 to Boost Bets on U.S. Stock Rally"

http://www.bloomberg.com/news/2011-...ince-october-2007-to-purchase-u-s-stocks.html

“...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...”

What is amazing to me is the dislocations that this insanity can cause.
 
Quote from nitro:

...I suspect the FED will put an end to all this charade soon by raising IRs to .25% which may see a huge sell-off across the board in all asset classes. Just to scare people, they can't really raise rates that much with chronic unemployment...But zero (nominal) is clearly the wrong IR.
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"...That’s trader speak -- in other words QE2 may be coming to an end ahead of schedule. As you can see from this chart the S&P began moving sharply higher in late summer, when talk of QE2 first hit the market....The sudden and sharp shift in market sentiment follows commentary from St. Louis Fed Reserve President James Bullard who’s largely seen as a centrist.

Speaking at a Chamber of Commerce breakfast held at Western Kentucky University he said, "The natural debate now is whether to complete the program or to taper off to a somewhat lower level of assets."

http://www.cnbc.com/id/41766879
 
Quote from nitro:

"Hedge Funds Borrow the Most Since 2007 to Boost Bets on U.S. Stock Rally"

http://www.bloomberg.com/news/2011-...ince-october-2007-to-purchase-u-s-stocks.html

“...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...”

What is amazing to me is the dislocations that this insanity can cause.
More...
http://humblestudentofthemarkets.blogspot.com/
 
Quote from nitro:

I am truly stomped. My model says this market is hugely overextended. What do you want me to say, that I am getting pulverized? I don't understand, so I say nothing.

"Whereof one cannot speak, thereof one must be silent." - Ludwig Wittgenstein
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If the particular variable that no longer appears to have explanatory power were anti-commuting, it would explain some of (all ?) of the divergence, but that is really hard to wrap my head around.

It could even be a Grassmann number.
 
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