Happy Black Thursday Do Tumbling Buybacks Signal Another Market Crash?

[Crewleader]

By Mike Whitney

“Frankly, we are so far off the economic rails, the locomotive is stuck in a swamp and the trailing cars are piling up around it.” Anonymous, Comments line, Naked Capitalism

October 23, 2014 "ICH" - "Counterpunch" - Since the end of the recession in 2009, investors have borrowed a record amount of money to finance their stock acquisitions. According to the Financial Times, margin debt on the New York Stock Exchange (NYSE) peaked in February, 2014 at $466 billion and has only recently dipped slightly lower. That’s $85 billion more than 2007 at the peak of the bubble. (Below: Margin debt tends to trace the trajectory of the markets fairly closely, although it’s a poor indicator of a market “top”.)



When stocks start see-sawing like they did last week, it’s usually a sign that over-extended investors are dumping their stocks to meet margin calls. The same thing happened in the run-up to the Crash of 1929. Stocks dropped sharply in late October which forced deeply-indebted investors to unload their holdings at firesale prices. The falling prices triggered a panic that sent stocks into freefall wiping out billions of dollars, crashing the markets, and paving the way for the Great Depression. Here’s a brief summary of what happened:

“On September 3, the market dropped sharply only to rise and then drop again. It was like tremors before a big earthquake but nobody heeded the warning. The market had sagged temporarily before, but it always came back stronger. The market dipped sharply again on October 4 (and) October 21 saw an avalanche of selling as many tried to salvage something from their loss. On October 24 — Black Thursday — the panic took on a life of its own as selling orders overwhelmed the Exchange’s ability to keep up with the transactions…

http://www.informationclearinghouse.info/article40049.htm

[eridani]

1. I'm not worried about getting out, because I never got back in n/t

[DemReadingDU]

2. Same here, but

Pensions rely on the markets, so does anyone who has a 401K or an IRA.