Skip to comments.Margin Debt Hits All-Time High
Posted on 02/02/2014 12:46:29 PM PST by Red in Blue PA
In the month of December margin debt on the NYSE surged by over $20 Billion dollars hitting a new all-time high of $444.931 billion. The rise in leverage also sent investors net worth to a negative $149.358 billion which is also a record. This is shown in the chart below.
(Excerpt) Read more at investing.com ...
I am normally bullish on markets, but recent trends such as this are getting me to get defensive. Surveys show people are bullish for 2014; I am not.
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them shur are good lokin biskits
(I got me a 'hankerin' fer sum too 'bout now...)
Why does this guy call "Net Credit Balance" net worth?
If my memory of American Economic History serves me right, this is bad news.
I see people in line for the lottery and think the same thing. The nation is diseased.
Didn’t that happen in 1929?
Well, if anything can call a top, this news is definitely on the mark. As the market begins to slide, those whose equity falls below the margin requirement get a “margin” call. That means either show up at the office with some cash or marginable securities or we will close out sufficient securities to make your “call”. When such margin calls become commonplace, the sells feed on themselves as more holders get the calls and the markets really tanks.
If you are not on margin sit back and enjoy the show. The high margin levels and the optimism of the “analysts” is a perfect storm of hope being dashed by reality. Full of hope for making many dollars squashed by getting left with the change.
Key para. in the article.
“It is important to note that it is not the rise in margin debt that is the problem for the markets - it is the fall. When the ultimate reversal begins, and investors are forced to liquidate to meet margin calls, the market begins to feed upon itself. This forced liquidation quickly accelerates downside reversions in equity markets leaving investors little opportunity to react. The last two peaks in margin debts have had nasty outcomes for this very reason.”
The Stock Market is pumped up by artificial money which is really just the Federal Reserve moving numbers on iPhones and computer screens. What could go wrong?
All it will take is a small turn in the opposite direction and people will be rushing to the exits in the proverbial theater after someone yells fire.
Bubble, bubble, bubble. Let the games begin.