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Stock market margin debt, as reported by the NYSE, has now surged to a record high of $528 billion. That's not including loads of unreported margin, or "shadow margin," that Richter says could put the total figure somewhere near $800 billion.

Margin debt is in an uncanny relationship with the stock market ... It soars when stocks soar and crashes when stocks crash. They feed on each other.

Clearly, the stock market has become crazy leveraged. And, also clearly, that often leads to big losses when it starts to fall apart.

Greedy novices are diving in with accounts barely large enough to fund a lemonaide stand yet they leverage up as if they had a million.

http://www.zerohedge.com/news/2017-04-27/trump-100-margin-debt-stock-bubble-and-gold
 
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comagnum said:
Stock market margin debt, as reported by the NYSE, has now surged to a record high of $528 billion. That's not including loads of unreported margin, or "shadow margin," that Richter says could put the total figure somewhere near $800 billion.

Margin debt is in an uncanny relationship with the stock market ... It soars when stocks soar and crashes when stocks crash. They feed on each other.

Clearly, the stock market has become crazy leveraged. And, also clearly, that often leads to big losses when it starts to fall apart.

Greedy novices are diving in with accounts barely large enough to fund a lemonaide stand yet they leverage up as if they had a million.

http://www.zerohedge.com/news/2017-04-27/trump-100-margin-debt-stock-bubble-and-gold
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Your link said bubble is here, so buy gold?
 
ironchef said:
Looking at your chart, I just don't understand your conclusion: In 2005, it was ~1.6% and today 2.2% an increase of ~40%. To me that is a huge % increase. Also, the increase is almost monotonic and if it continues....
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Your conclusion from the chart is wrong. The point is to compare the % to the overall cap. Haven't changed much.
 
ironchef said:
Looking at your chart, I just don't understand your conclusion: In 2005, it was ~1.6% and today 2.2% an increase of ~40%. To me that is a huge % increase. Also, the increase is almost monotonic and if it continues....
More...

I just eyeballed it. If you want to compare last 10 years it is in the same range.
chart (2).png


You cannot compare raw numbers and say it is bad thing. It has to be normalized and it has to have predictive value in the future to say it is bad thing.
During the bull market it is pretty normal to have higher margin debt. In fact i find it more surprising as % GDP it has not grown much in last decade, especially with low interest rates. Investors have become more risk averse compared to history perhaps because of deep scar of 2008 recession.

https://www.bloomberg.com/view/articles/2015-04-29/don-t-count-on-margin-debt-as-a-crash-indicator
 
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Margin debt going up with the market rising is not the problem - it's when the margin debt peaks & turns down - look out below.

Margin debt relative to market cap is flawed - in a raging bull market the market cap expands many fold. Margin debt to market cap does not take this into account. 2% of margin debt on Apple with a market cap of 100B and 2% again with a market cap of 700B is not the same - not even close!

Just because the market is richer does not mean the participants are also, market debt to market cap assumes this - which is deeply flawed.

margin debt.PNG
 
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comagnum said:
Margin debt going up with the market rising is not the problem - it's when the margin debt peaks & turns down - look out below.

Margin debt relative to market cap is flawed - in a raging bull market the market cap expands many fold. Margin debt to market cap does not take this into account. 2% of margin debt on Apple with a market cap of 100B and 2% again with a market cap of 700B is not the same - not even close!

Just because the market is richer does not mean the participants are also, market debt to market cap assumes this - which is deeply flawed.
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You clearly have a point of view that isn't going to change. Even when faced with data that disproves it, you've shown unwillingness to let it go.
 
Data that disproves it? Have not see any data or a case being made for it. For margin debt to market cap be of any practical use you would have to believe that 2% (margin debt) of 100B is the same as 2% of 700B - that represents Apples market cap growth over a portion of this bull market. If the chart of margin debt to cap worked half as good as the pure margin debt in leading market turns I would use it, it doesn't because it does not take into account the market caps have gone up many fold and the investors available cash reserves have not.

Some people follow the margin debt to market cap - I get that.I don't because it did not even rise during the entire dot.com bull market when margin went insane - people were taking a second mortgage to get into any dot.com IPO.
Most people follow margin debt - it is the widely watched metric because of it's historical performance in turning down before the market does.

I
 
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srinir said:
I just eyeballed it. If you want to compare last 10 years it is in the same range.
View attachment 174822

You cannot compare raw numbers and say it is bad thing. It has to be normalized and it has to have predictive value in the future to say it is bad thing.
During the bull market it is pretty normal to have higher margin debt. In fact i find it more surprising as % GDP it has not grown much in last decade, especially with low interest rates. Investors have become more risk averse compared to history perhaps because of deep scar of 2008 recession.

https://www.bloomberg.com/view/articles/2015-04-29/don-t-count-on-margin-debt-as-a-crash-indicator
More...
Thanks srinir,

First of all I want you to know I have no opinion on this subject matter and so do not have a dog in this fight.

Second, I am not an economist nor have a finance background so really don't know at what % of market cap is margin debt dangerous.

Third, thank you for the link to the article. What puzzle me is the chart in the article was not consistent with the conclusion of the article title. Here is the chart:

upload_2017-6-24_19-41-42.png


It seemed to indicate we are marching toward the next crush according to the chart. Maybe not today but could be in the not too distant future?

Best to you.
 
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