In year 2000 when the Dow Jones reached a new all-time nominal high of 11,723, NYSE margin debt reached a new all-time high of $278.53 billion or 2.78% of U.S. GDP. Afterwards, the Dow Jones declined 37.8% to a low in 2002 of 7,286, as NYSE margin debt declined 53.3% to a low in 2002 of $130.21 billion or 1.18% of U.S. GDP.
In year 2007 when the Dow Jones reached a new all-time nominal high of 14,165, NYSE margin debt reached a new all-time high of $381.37 billion or 2.62% of U.S. GDP. Afterwards, the Dow Jones declined 53.8% to a low in 2009 of 6,547, as NYSE margin debt declined 54.6% to a low in 2009 of $173.3 billion or 1.2% of U.S. GDP.
NYSE margin debt is now up to a new all-time high of $464.31 billion. NYSE margin debt is currently equal to 2.68% of U.S. GDP, which is the mid-range of its previous peaks from years 2007 and 2000 of 2.62% and 2.78%, respectively!
Over the last 56 years, NYSE margin debt has averaged only 0.95% of U.S. GDP. In fact, during the 1970s when inflation nearly spiraled out of control, NYSE margin debt averaged only 0.41% of U.S. GDP. NYSE margin debt is currently 2.82X its long-term average and 6.54X its 1970s average (as a percentage of U.S. GDP).
NIA considers it to be a 100% sure thing that as interest rates rise, NYSE margin debt as a percentage of GDP will plummet. NIA predicts that over the next 2-3 years, NYSE margin debt will decline back to its long-term average of 0.95% of U.S. GDP. This means (based on current U.S. GDP) NYSE margin debt will need to decline by 64.6% to $164.3 billion, which will cause the Dow Jones to once again make a very dramatic downward correction.
As the Dow Jones collapses, precious metals and the stocks of gold/silver exploration/mining companies will skyrocket. Agricultural commodities will also rise substantially. Perhaps the biggest gaining commodity in the short-term will be graphite, due to Tesla (TSLA)‘s new $5 billion battery Gigafactory that is about to be constructed (most likely in Nevada). TSLA is expected to purchase all of its graphite from North American graphite mines, but very few are currently in production.
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