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What Rosenberg Is Looking At - Rolling Margin Debt Has Gone Negative

Tyler Durden's picture




 

With market dynamics continuing to be virtually identical to the start of last year, many struggle to find what incremental events at the margin may  determine what is not priced in by the market (because apparently everything else is). As we pointed out recently, one such potential factor is that short interest on the NYSE has plunged to practically multi-year lows. And yet the melt up has continued indicating the short covering has come and gone, and at this point it is incremental buying that is probably driving stocks. Yet even that may be ending: since we are looking at the margin, it makes sense to present David Rosenberg's observations on what it is that he is looking at the moment, which appropriately enough, is NYSE margin debt, whose 12 month trailing average has just turned negative: traditionally an important inflection point.

From Gluskin-Sheff's David Rosenberg:

IT'S ALL AT THE MARGIN!

 

When the experts say that the stock market is a leading indicator, maybe they are referring to margin debt — seeing as this provides a bit of a pulse on the investor appetite for risk. The 12-month trend in margin debt slipped into negative terrain in December 2000 and then did it again in April 2008. Both times, heeding this trend paid dividends in the sense that they both led downturns in both economic activity and in equity market valuation. The YoY trend just slipped into negative terrain last November for the first time since 2009 —just something to consider.

 

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Tue, 01/17/2012 - 15:31 | 2071928 French Frog
French Frog's picture

Sweet !

Tue, 01/17/2012 - 15:37 | 2071951 Hard1
Hard1's picture

This is ultra bullish for bubble riders!!!. Based on the chart, we still have about a year to go into really negative territory before anything happens.

Tue, 01/17/2012 - 15:38 | 2071955 redpill
redpill's picture

No worries, 12-21-12 has been priced in.

Tue, 01/17/2012 - 15:38 | 2071952 redpill
redpill's picture

Bullish!

Tue, 01/17/2012 - 16:12 | 2072046 Mr Lennon Hendrix
Mr Lennon Hendrix's picture

Bullishly priced in, so BTFD!

Tue, 01/17/2012 - 15:43 | 2071969 LawsofPhysics
LawsofPhysics's picture

Hold on now, what does a chart for the volume look like over the same time period?  Has Rosy fully consider the current vapor trading model?

Tue, 01/17/2012 - 15:31 | 2071929 TooBearish
TooBearish's picture

Poor David- he just doesnt get it - look at all the potential BUYING POWER implied by this statistic....sheesh....

Tue, 01/17/2012 - 15:39 | 2071941 SeverinSlade
SeverinSlade's picture

Uh huh, until Greece defaults and makes AIG look like a fart in the wind.

Wonder how equities will fare considering that the ponzi banking system is glued together with a thin layer of Elmer's.

With the amount of leverage, rehypothication, etc. that exists in the system, I highly doubt that all of those CDS will pay out if triggered.  After all, the entire banking system is only as good as the weakest link.

Tue, 01/17/2012 - 17:15 | 2072293 LongSoupLine
LongSoupLine's picture

but, but CNBS said an hour ago (when "explaining" the CDS default process) that the "net risk" of a Greek default is less than...wait for it...

$4 billion.

yep, so one littl' ol' Brian Sack MOMO session can fix a full Greek CDS default. 

Tue, 01/17/2012 - 15:53 | 2071997 SheepDog-One
SheepDog-One's picture

And what about all those piles of 'CASH ON THE SIDELINES'?? 

Tue, 01/17/2012 - 16:06 | 2072015 nope-1004
nope-1004's picture

There must be piles of cash on the sidelines, because the average age of vehicles in the US just hit an all time high, 11 years!  One can only conclude that since vehicle sales are way down, the average underwater homeowner or some of the 48 million Americans on food stamps must be chomping at the bit to jump into stocks.

/ SARC

Tue, 01/17/2012 - 22:47 | 2073160 rosiescenario
rosiescenario's picture

.....time to buy the auto parts retailers....just an observation, but there appears to also be a direct correlation between the number of auto parts dealers in a given part of town and the number of folks on welfare in that same area....

 

Just look around the next time you are in the part of town where you buy your crack, and count the number of auto parts stores...

Tue, 01/17/2012 - 15:32 | 2071930 s2man
s2man's picture

Its smelling like 2008 all over the place.

Tue, 01/17/2012 - 15:39 | 2071954 firstdivision
firstdivision's picture

Smells like spring of '08, with "Bear Steans is bankrupt, but everything else is ok".

Tue, 01/17/2012 - 16:40 | 2072147 sodbuster
sodbuster's picture

No, No, No, Bear Stearns is FINE!!

Tue, 01/17/2012 - 16:46 | 2072179 SheepDog-One
SheepDog-One's picture

Totaly contained to sub-prime!

Tue, 01/17/2012 - 19:47 | 2072742 Amish Hacker
Amish Hacker's picture

And everything not totally contained is totally priced in. Everybody back in the pool!

Tue, 01/17/2012 - 22:38 | 2073131 Ropingdown
Ropingdown's picture

Buy Bear Stearns!  They're just the temporary victim of rumor mongering.

Tue, 01/17/2012 - 15:32 | 2071931 SeverinSlade
SeverinSlade's picture

QE will not come with S&P at 1300.  I suspect that the fellas over at GS are building their short positions.  CNBS is just airing state sponsored propaganda to entice idiot retail investors to buy now while "stocks are cheap."  After all, GS and all of their buddies need idiots to sell their long positions to.

Tue, 01/17/2012 - 15:38 | 2071953 distopiandreamboy
distopiandreamboy's picture

Only the VIX is truly cheap right now.

Tue, 01/17/2012 - 15:40 | 2071957 fonzannoon
fonzannoon's picture

Man I hope you are right about that.

Tue, 01/17/2012 - 19:53 | 2072749 Amish Hacker
Amish Hacker's picture

Sounds like somebody has been playing in the VXX sandbox.

Tue, 01/17/2012 - 15:36 | 2071946 Dr. Engali
Dr. Engali's picture

It's feeling like 08 with this constant creep up in the market.

Tue, 01/17/2012 - 15:42 | 2071968 SeverinSlade
SeverinSlade's picture

As well as the fact that MSM continues to ignore the actual news coming out of Europe, China, Iran, etc. daily.

I mean seriously, oil going up is bullish for equities?

A WWIII scenario developing with Iran/Russia/China is bullish?

The Euro has been plunging of late, the dollar surging, yet equities priced in USD have also been surging?

We are truly living in 1984.  War is peace.  Freedom is slavery.

Tue, 01/17/2012 - 15:48 | 2071986 LawsofPhysics
LawsofPhysics's picture

Most importantly, ignorance is strength.

Tue, 01/17/2012 - 16:15 | 2072055 Mr Lennon Hendrix
Mr Lennon Hendrix's picture

Igorance is priced in.

Tue, 01/17/2012 - 16:47 | 2072184 SheepDog-One
SheepDog-One's picture

Ignorance is the new wisdom.

Tue, 01/17/2012 - 16:54 | 2072224 Stack Trace
Stack Trace's picture

What you don't know can't hurt you until you know it.

Tue, 01/17/2012 - 22:49 | 2073170 rosiescenario
rosiescenario's picture

....ignorance is priced in at 3X via a derivative sold on gross stupidity....

Tue, 01/17/2012 - 15:40 | 2071959 scatterbrains
scatterbrains's picture

could this be a mild panic run on the brokers as a result of the re-hypothocation news ?  When momo bulltards cover their margined longs and bears crawl back in their caves who's left to margin up their trades ?

Tue, 01/17/2012 - 15:41 | 2071965 redpill
redpill's picture

Invade Us, Uranus!

/Krug

Tue, 01/17/2012 - 16:15 | 2072061 Mr Lennon Hendrix
Mr Lennon Hendrix's picture

Skit about Krugman playing with Star Wars toys inserted here.

Tue, 01/17/2012 - 15:44 | 2071970 ebworthen
ebworthen's picture

2008 Quotes, from the knowing, the unknowing, and the blind:

http://ftalphaville.ft.com/blog/2009/09/11/69376/quotes-du-crise/

One of my favorites from that tool Dick Bove that CNBC trots out for some unicorns shitting Skittles market fluffing:

June 9, 2008 (Reuters):

"They [Lehman] screwed up. But the fact of the matter is that this firm is sound, it’s well managed and will survive."

Tue, 01/17/2012 - 15:44 | 2071976 Dapper Dan
Dapper Dan's picture
Israeli hackers shut down UAE, Saudi Arabia stock exchange sites - The Next Web Story metadata:
Tue, 01/17/2012 - 17:45 | 2072396 NotApplicable
NotApplicable's picture

Shut down their web sites, not their exchanges. In other words, petty vandalism, akin to graffiti on a store-front.

Tue, 01/17/2012 - 15:50 | 2071987 Caviar Emptor
Caviar Emptor's picture

Market shrank for first time since 2009.U.S. Market Shrinks for First Time Since 2009- Bloomberg

Media want to attribute it to stock buy backs. 

But that covers up the most important factor: share removal is faster than share creation through new issuance, which has undergone shrinkage, like a frightened turtle pulling into a shell. 

And that, friends, is the surest sign of a down economy that's not creating anything: no new companies, no worthwile venutres, no jobs. Just ask yourself why. It's not that America is lacking for brains, creativity, energy or cash. It's that business conditions suck the big one. In the passion to "save" failed banks and crony businesses we've starved competition and creativity and profitability for businesses not benfitting from Fed money and corporate welfare. This is the corporate welfare state. 

Tue, 01/17/2012 - 15:56 | 2072007 SeverinSlade
SeverinSlade's picture

You're onto something.

How are businesses "growing" in today's environment?  It isn't by increasing productivity.  It isn't about generating true growth and expansion.  It's by penny pinching, cutting costs (by trimming employment), M&A, etc.  That model goes all the way down to main street as well.  Instead of individuals going out and making more money for themselves, they're instead doing the same thing...Pinching pennies, clipping coupons, always trying to find the lowest price on merchandise (people go into Best Buy, Target, etc. and scan an item with their smartphone to see who has it cheaper), etc.  I mean we having a fucking show called "Extreme Couponers" where poor families resort to spending 40+ hours a week clipping fucking COUPONS just so they can buy food.

We need to restore our country to where it was (as far as taxes, monetary policy, size of government, etc.) before 1913 if we ever want true economic properity again.

Tue, 01/17/2012 - 16:04 | 2072020 Caviar Emptor
Caviar Emptor's picture

Yup. Coupon Suzy looks sexy these days. How far we've fallen....

What you're describing is exactly what I agree with and have been saying for some time: the downsizing of America is happening and most don't even realize it or don't want to. The stock market is shrinking, and that's yet another confirmatory indicator of economic contraction (also jobs created versus destroyed, loss of industrial base, shrinking median real incomes and shrinking family net worths). Theyr'e trying to make monetary inflation look like growth: if the stock market shrinks but each share is more expensive...that's growth, right?????? But the real economy is stalled out and ripe for another leg down. THey ain't foolin anyone

Tue, 01/17/2012 - 16:13 | 2072050 SeverinSlade
SeverinSlade's picture

Well they've succeeded in fooling the Sheeple.  The Sheeple believe that expanding our national debt is essential to rebuilding our economy.  The Sheeple believe that using our military in offensive preemptive (yet illegal) war is vital to our national security.  The Sheeple believe that we need more government to protect us.  That we need more government to "create" jobs even though the government cannot create a single job.

We are the minority that's for damn sure.

Tue, 01/17/2012 - 16:24 | 2072086 Caviar Emptor
Caviar Emptor's picture

Yup. But sheeple with their heads up their arses will get badly hurt. Out there I've been seeing two kinds: There's the group who are deeply skeptical about the future. They are being really tight fisted and not taking on debt. Their shopping patterns are totally changed from before and they are focused on essentials, bargains and not making big ticket purchases. There's another group who are aware that things are bad now but "waiting for the turn". They've cut back too but they are not afraid of credit card debt. They are sweating out though. 

Tue, 01/17/2012 - 16:13 | 2072051 qussl3
qussl3's picture

Total miles driven.

Thats enough of an indicator right there.

Tue, 01/17/2012 - 18:38 | 2072558 lizzy36
lizzy36's picture

In an attempt to save the banks they killed the economy that supports the banks.

There are two big issues that i continue to hammer on:

1) The US does not run (literally) on $100 oil. 

2) Misallocation of capital caused by ZIRP. 

America doesn`t lack for brains, energy or cash. But the above two factors which are essentially byproducts of failed monetary policy are destroying the country.

The biggest danger to America isn`t any terrorist, it isn`t Iran getting a nuclear weapon, it is the delusions of grandeur currently residing at the Federal Reserve. 

Tue, 01/17/2012 - 21:31 | 2072940 Alpha Monkey
Alpha Monkey's picture

The biggest danger to America isn`t any terrorist, it isn`t Iran getting a nuclear weapon, it is the delusions of grandeur currently residing at the Federal Reserve.

But, they sure make a good cover for the theft occuring from our back pocket.  

 

Tue, 01/17/2012 - 16:09 | 2072034 RobotTrader
RobotTrader's picture

Absolutely harrowing day for GDX.

http://bigcharts.marketwatch.com/kaavio.Webhost/charts/big.chart?nosettings=1&symb=gdx&uf=0&type=2&size=2&sid=2325226&style=320&freq=1&time=8&rand=2064305945&compidx=&ma=0&maval=9&lf=1&lf2=0&lf3=0&height=335&width=579&mocktick=1

Meanwhile XRT is unfazed.

The bigger the credit crisis, the more gold sells off.

The worse the problems in Europe, U.S. consumer stocks go up even faster.

Tue, 01/17/2012 - 16:15 | 2072057 fonzannoon
fonzannoon's picture

You sound desperate. CNBC pitching this guy Rosenberg to come on today and sound bullish.

Tue, 01/17/2012 - 16:23 | 2072082 LawsofPhysics
LawsofPhysics's picture

My god, robo is Rosenberg.

Tue, 01/17/2012 - 16:44 | 2072167 SheepDog-One
SheepDog-One's picture

Robo is Rosenpenis.

Tue, 01/17/2012 - 17:51 | 2072415 NotApplicable
NotApplicable's picture

I gotta give you credit, Robo. You stay in character so well, sometimes it's hard to decide if you're really this dumb or not. So just for the time being, I'll play along.

... interlude music during scene change ...

So, about that gold "sell off," I take it you missed the ZH post talking how it goes up every night, but sells off during the day?

Tue, 01/17/2012 - 17:20 | 2072299 Madcow
Madcow's picture

what sort of 'tard borrows money on the eve of a global deflationary depression ?

Tue, 01/17/2012 - 18:38 | 2072516 Arvo Particleboard
Arvo Particleboard's picture

I have no idea.

BTW, you think you could loan me fifty bucks?

Wed, 01/18/2012 - 06:00 | 2073743 StychoKiller
StychoKiller's picture

I could use $300 myself, so if you could just hit up 6 more folks for $50...much obliged.

Tue, 01/17/2012 - 18:57 | 2072617 ebworthen
ebworthen's picture

CNBC had Rosenberg on today.

The lead-in said that "Even this bear may be becoming positive on the markets."

In the interview with Maria "G6" Bartiromo Rosenberg noted only 1.5% GDP in 2011 and said probably the same for 2012.

Also said:

"...suffice it to say that the down side risks to the u.s. economy at a time when the run rate on gdp growth is 1.5%. i still believe that the fragility in the down side are still acute. we still haven't seen the full impact of the european recession hit home."

Positive on the markets?

Another CNBC snow job.

http://video.cnbc.com/gallery/?video=3000067926

 

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