Below are some of the most interesting things I came across this week. Click here to subscribe to our free weekly newsletter and get this post delivered to your inbox each Saturday morning.
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Allison Schrager writes, “There was a time when it seemed like housing would always pay-off, no matter how much debt you took on; and often it did. The housing bust of the global financial crisis shattered that illusion. Now it seems stocks are the sure bet.”
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Stocks feel like such a sure bet, in fact, that investors are more comfortable using leverage to enhance returns than ever before. “With this latest jump, the 3-month rate of change for Margin Debt came in at 23%. This lofty level has only been reached two other times in history: two months before the peak of the Tech Bubble and four months ahead of the peak in 2007 that led the Great Financial Crisis,” reports InvesTech.
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Yet, it’s just when something feels like a sure bet that things may be as good as they are going to get. Jim Paulsen writes, “Never since 1950, has ‘both’ price and EPS been as extremely far above trendline as they are today, suggesting stock market capacity may currently be more limited than it has ever been during the post-war era.”
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It certainly appears that the smart money may think so. “US executives are selling shares at the second-fastest pace in more than 20 years, a classic red flag to some investors because it suggests people with the most corporate knowledge are wary about market,” reports Bloomberg.
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Like I pointed out last week, though, that doesn’t mean there aren’t compelling opportunities under the surface. As GMO puts it, “Value is extremely cheap.”
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