Margin debt saw an annual surge of 49% in February to $814 billion, which was the fastest jump since 2007.
Berkshire Hathaway CEO Warren Buffett has argued against borrowing money to invest in stocks. So-called margin debt rose to a record in January. Margin calls, in which brokers demand a cash replenishment of their clients’ accounts, were among the reasons strategists cited for the pace of the recent stock sell-off. […]
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Increased leverage. Increased risks.
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Things are about to change.
Much has been made in the press about how NYSE margin debt is at an all-time high, suggesting that investors are excessively bullish. However, stock markets themselves are also at all-time highs — so perhaps the level of margin debt doesn’t really tell us much that we don’t already know. […]
That's a bearish signal.
We’ve noted that margin debt at the NYSE has been rising steadily as stocks have advanced in recent months. Like the stock market, total margin is close to all-time highs.
Here’s an interesting bit of correlation (and causation?) for you. Have a look at the chart I formulated below showing NYSE Margin Debt and the S&P 500. The two data sets show a correlation over 85%. Now, this is really interesting in that it melds with our work on Monetary […]
BofA Merrill Lynch analyst Mary Ann Bartels highlights an interesting trend in a note to clients this morning – margin debt at the New York Stock Exchange is moving up, and that seems to indicate that investors are leveraging up their exposure to the market.
In times of uncertainty, when many fear the sky is falling and that there is no hope for recovery, a prudent investor will begin to look for opportunities.