Margin Debt Highest Since the Crash

Margin debt in April reached $320 billion, the highest level seen since February 2008, one of the most unfortunate cases of BTFD in recent memory.

Margin debt topped $381.4 billion in July 2007, just before the market peaked in October.  The S&P 500 plunged 58% over the next 17 months.

Source: NYXdata.com

Why the $5 billion increase from March to April?  Could it be investors have bought the notion that the Fed won't let the market go down? 

Let's hope they don't all rush the exits at once when someone finally notices the inferno into which the Fed has been sQErting lighter fluid. 

Credit Default Swaps Hint at the Next Casualty

Short term US Government credit default swaps have more than tripled since April.  If this were solely the result of debt ceiling debate, I wouldn't be so worried.

http://blogs.wsj.com/marketbeat/2011/05/25/us-short-term-cds-spreads-sharply-wider/

I suspect it has more to do with the fact that US debt is forecast to exceed 155% of GDP by 2035 (see the report from the Peterson Institute for International Economics, or read about it here.)  Even though the Peterson Institute's solution is gutting Social Security and Medicare, I imagine their prediction is accurate.

Can't be, you say?  Those numbers are worse than Greece (102%) and Ireland (112%)!!! 

Okay, I admit I shaded the truth a bit.  Those are the best case data.  The Peterson folks suggest the debt might actually climb to over 300% of GDP.