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The Massive De-Leveraging of the U.S. Stock Market Since October Threatens the ‘All-Everything Bubble’

May 15, 2022 (EIRNS)—A key component of the “all everything” bubble, the highly leveraged U.S. stock market, is deleveraging, accompanied by a sharp fall in the stock market. The May 14 Wall Street Journal reported, “U.S. stocks are off to their worst start to a year in more than a half-century. By some measures, they still look expensive.” This is an understatement; there is a long way to fall. The U.S. housing market and associated mortgage-backed instruments are hitting a serious crisis. The U.S. physical economy is contracting. The threat is not to any one financial market, but to the “all everything” bubble globally.

This is reflected in the falling level of margin debt. Margin debt occurs as an investor who owns stocks pledges a portion of that debt as collateral to get a loan from a broker or financial institution to buy even more stock. The stock that is pledged as collateral has to maintain a certain value; failing that, the investor will get a margin call from their broker to put up more stock collateral for the loan. The level of U.S. investors’ margin debt peaked at $936 billion in October of last year, sending the stock market upward. But since then, it has fallen $163 billion, or 17%, to $733 billion, as brokers make “margin calls” in which brokers demand more collateral or call in the loans. This accelerates a stock sell-off. Since the October start of the decline in margin-debt, the highly leveraged NASDAQ average, which represents “high-tech” stocks, has fallen by 27%.

Analyst Wolf Richter reports in a May 13 column, “Massive Stock Market Leverage Unwinds amid Brutal Bloodletting” that dozens upon dozens of high-flying firms are having their stocks lose 70% to 95% of their value. The percentages of falls, from their highs through May 13, for some companies are: Carvana, the fastest-growing U.S. online car-seller, −90%; Zoom, one of the world’s largest online teleconferencing companies, −79%; Coinbase, which operates one of the largest crypto-currency exchange platforms, −83%; Lyft, the second largest car-hailing services in America after Uber, −77%; Redfin, one of America’s largest real estate brokers, −88%; and the list goes on.

As Fed Chairman Jerome Powell and other central bankers intensify interest rates hikes to futilely attempt to check runaway inflation caused by their own decade-long “quantitative easing,” and the Green Reset policies, the environment ripens for an increased spike in failures.

But the risks do need to be stated, since the current “narrative” fed to the populace is leading the world to nuclear conflagration.

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