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Deutsche Bank has published a note, highlighting eerie similarities between current commentary about high margin debt levels, with those preceding the 2007 and 1999 stock market crashes. In particular, phrases involving the mispricing of risk, high leverage leading to a market plunge and investors leveraging and buying based on a rising market are found to be common. Deutsche Bank notes that high leverage can lead to disorderly exits from the market, with fund managers become forced liquidators of portfolios. The commentator believes that we are now in similar territory to the periods preceding the 1999 and 2007 stock market crashes. He blames this on quantitative easing by the Fed, providing easy credit which simply inflates asset prices without benefiting the economy. (VIEW LINK)


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