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NYSE Margin Debt Surges To Highest Since February 2008, Net Speculator Leverage Second Highest Ever

Tyler Durden's picture




 

The NYSE has released its monthly margin debt update for March. Not surprisingly, with everyone, and yes EVERYONE, chasing nothing but levered beta, margin debt surged to a fresh 3 year high at $315.7 billion, the highest since February 2008. But far more troubling is that when netting out positive margin balances such as Free Credit Cash Accounts and Credit Balances in Margin Accounts, the investor net worth, or alternatively net leverage, as it is defined, plunged by $18.2 billion to ($75.2) billion. This is the second highest net leverage ever seen on on the NYSE, only lower compared to the $79 billion hit at the absolute peak of the credit bubble in June 2007. We all know what followed after. Ironically, when this kind of mass hysteria happens in commodities the CME can't wait to hike margins to cool those evil, evil speculators. It is only natural that the Globex will hike ES margins in 5....4....3.....

 

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Tue, 04/19/2011 - 12:33 | 1184397 Sudden Debt
Sudden Debt's picture

HELLO I'M SATAN AND I LOVE SILVER!

Tue, 04/19/2011 - 12:49 | 1184514 uno
uno's picture

everyone knows Satan loves fiat, that's what gives it energy

Tue, 04/19/2011 - 15:16 | 1185178 iowaguy
iowaguy's picture

I can confirm that my wife is Satan and she does loves fiat

Wed, 04/20/2011 - 13:30 | 1188919 CitizenPete
CitizenPete's picture

Most silver coins do contain the mark of the beast.  999

 

Depends on your perspective.  

Tue, 04/19/2011 - 12:37 | 1184405 HamyWanger
HamyWanger's picture

Yes, but my bro' Bernanke will never allow the SPY to go down, so lunatic goldbugs should suck it in and cope, or better yet, go long NFLX and try to actually earn some money. 

Margin doesn't matter when all the government is behind you. The FED learnt the mistakes from 2008 and will now support stock market investors. At the slightest 2% drop their "men" will activate themselves behind the curtains... 

LOL...

Tue, 04/19/2011 - 12:40 | 1184446 TruthInSunshine
TruthInSunshine's picture

Let's hope the new and improved Bernanke Put works better than in 2008, or the Greenspan Put did in 2000.

Let us hope.

Tue, 04/19/2011 - 12:52 | 1184487 SheepDog-One
SheepDog-One's picture

Yes the bankrupt govt insures and backstops it all....somehow Im not feeling more at ease.

The FED men can 'activate' and fondle themselves as much as they like behind the curtain...1930-32 here we are.

Tue, 04/19/2011 - 13:30 | 1184750 MarketTruth
MarketTruth's picture

Technically,. you are never bankrupt when you own the 'printing press'... though ask Germans what happens when the world no longer accepts the crap being printed out.

Tue, 04/19/2011 - 13:30 | 1184762 TruthInSunshine
TruthInSunshine's picture

To be complete, however, the mark was not only not a reserve currency, but it wasn't even a major one on a global level, as post WWI Germany's economy was in ruins.

Tue, 04/19/2011 - 14:35 | 1185017 sun tzu
sun tzu's picture

The bigger they are, the harder they fall. That merely gives more room for the dollar to collapse when the SHTF. The USD is propped up because it is currently the reserve currency. 

Tue, 04/19/2011 - 13:42 | 1184801 knukles
knukles's picture

This is bullish, no?
Where everybody got rid of mortgage debt, there's enough room for more Gubmaint and tons of margin debt, no?  And stocks always go up, unlike houses, right?

Not like this'd be an indicator of excess or a tipping point would it, now. 

I mean, all's well that ends.  Or sumpthin'

Tue, 04/19/2011 - 12:34 | 1184407 tallen
tallen's picture

Uh oh, 1929 here we go again.

Tue, 04/19/2011 - 12:42 | 1184474 101 years and c...
101 years and counting's picture

we had the 1929 correction in 2008/early 2009.  now, we're just waiting for the subsequent fall from mid 1930-mid 1932 that took the markets down 85% from the top.

 

 

Tue, 04/19/2011 - 12:51 | 1184541 TruthInSunshine
TruthInSunshine's picture

If you overlay a chart from '29 to '32 and from 2008 to now, well...

That '32 meltdown was the 2nd time absolute brutality that shook people out of the stock market for the rest of their lives - literally. 18 years for most.

Once bitten, twice shy.

Twice bitten, f**k that noise.

Tue, 04/19/2011 - 14:32 | 1185007 jmc8888
jmc8888's picture

...and then came Glass-Steagall

It appears it is playing out like before...which is asinine, since we went through it before.  There is no excuse (saying to a general audience) that we go down this same road again.  We can skip a few steps, pass go, and take back the $200 (quadrillion [tic])  from the banksters.

Tue, 04/19/2011 - 12:33 | 1184413 gordengeko
gordengeko's picture

Gonna be sick when Viki, ARIIA and skynet join as one.  Instead of selling to each other.

Tue, 04/19/2011 - 21:48 | 1186519 StychoKiller
StychoKiller's picture

Menage-a-trois(Bot!)  -- you know you won't be able to look away... :>D

Tue, 04/19/2011 - 12:33 | 1184414 MrPerspective
MrPerspective's picture

Difference between then and now is 2007 the signs were starting to show that we were slipping toward what many said was coming recession. Now, we're the exact opposite - in an ever strengthening economy. Even today with stronger housing starts we get this:

"Unemployment rates fell in 34 states in March from February. Only seven states saw rates rise, while rates in nine states and the District of Columbia were unchanged, a Labor Department report showed."

So it's very different when you're seeing steady growth and improvement vs. credit/housing bubble mentality of 2007.

 

Tue, 04/19/2011 - 12:38 | 1184433 TruthInSunshine
TruthInSunshine's picture

Hi RoboTrader.

Did you buy gold at $800 or $1500?

Silver at $5 or $30?

Tue, 04/19/2011 - 12:48 | 1184507 SheepDog-One
SheepDog-One's picture

Robo bought the triple inverse silver mining fund, which is now down -$30. Robo, the only man in america who has been crushed buying silver and gold.

Tue, 04/19/2011 - 12:41 | 1184455 LawsofPhysics
LawsofPhysics's picture

I see someone missed the gold and silver train, so sad.  How are those wages looking for most Americans?  Sorry idiot, interest and taxes can only be paid if people can afford to pay them.

Tue, 04/19/2011 - 12:44 | 1184473 redpill
redpill's picture

"Stronger housing starts" lol... yeah housing is about to explode.  Whatever helps you sleep at night pollyanna.

 

Tue, 04/19/2011 - 12:56 | 1184577 NotApplicable
NotApplicable's picture

Dear Failing Troll,

Unemployment is dropping only due to the 99ers falling off of the rolls. Workforce participation is still dropping.

My regards,

Reality

Tue, 04/19/2011 - 15:11 | 1185156 Cash_is_Trash
Cash_is_Trash's picture

Negative Investor Net Worth, bitchezzz

The whole country is inverted, thus negative and therefore fucked.

Wed, 04/20/2011 - 04:30 | 1187185 Rikki-Tikki-Tavi
Rikki-Tikki-Tavi's picture

Now wouldn't it be great if you in fact was right? I have, however, issues with the markets reflection of the economy but I think it is fair to ask what would make me reconsider my position. First and foremost I am extremely uncomfortable with the level of market manipulation (POMO, ZIRP, currency intervention, ...) by the various central banks and the resulting (unnatural) asset allocation in the investment community. I believe asset prices are primarily set by money flow and currently risk assets have unnatural (and long term unsustainable) beneficial terms which leads me to conclude that you are currently overpaying for risk. Take all the stimulus away, normalise interest rate levels and leave it to the market to find reasonable levels and I will be more than happy to reconsider my position and who knows perhaps even becomes bullish again.

Now should there be reasons why you think this can't be done these will likely be my reasons for being bearish on the economy.

Tue, 04/19/2011 - 12:37 | 1184424 TruthInSunshine
TruthInSunshine's picture

Mr. Margin is a motha**ker!! Be careful.

 

Oh yeah, when nuclear disastors are handled very badly, very bad things keep occurring (latest on reactor 1 which is under pressure, as David Bowie would say) -

Fukushima Reactor Number 1:

http://www.fairewinds.com/

Tue, 04/19/2011 - 12:38 | 1184431 Tracerfan
Tracerfan's picture

Those trading on margin are the "stupid money".

The smart money is here.

Tue, 04/19/2011 - 12:36 | 1184437 LawsofPhysics
LawsofPhysics's picture

Time to turn all paper into something physical (many options come to mind) and let all the snakes eat each other.

Tue, 04/19/2011 - 13:00 | 1184594 ihedgemyhedges
ihedgemyhedges's picture

Time to turn all paper into something physical (many options come to mind)

My neighbor just did that.  His wife left the house last Friday morning as a 32A and came back as a 34D.  Now THAT is turning paper in to something "physical"..........

Tue, 04/19/2011 - 21:53 | 1186529 StychoKiller
StychoKiller's picture

Daddy always likes a good-sized bust in the mouth! :>D

Tue, 04/19/2011 - 12:48 | 1184505 slaughterer
slaughterer's picture

It would be "good risk management" for CME to hike margins on spec positions in commodities.  The announcement should be very soon... 

Tue, 04/19/2011 - 12:52 | 1184536 topcallingtroll
topcallingtroll's picture

At some point.time to turn physical into paper, but these manias can run for a while. It has run a lot.further, faster than i thought it could

Tue, 04/19/2011 - 14:57 | 1185106 Chump
Chump's picture

Heh, you think the people buying physical are "trading."  Derp is as derp does I guess.

http://chzderp.files.wordpress.com/2011/04/hurr-durr-derp-face-derperator.jpg

Tue, 04/19/2011 - 13:09 | 1184649 web bot
web bot's picture

Anyone want to venture a guess what a stock market correction will do all of this levered debt? Then once the calls come in, what gets sold next to cover?

Tue, 04/19/2011 - 13:49 | 1184839 Korrath
Korrath's picture

I'm thinking along the same lines.  

When push comes to shove, these lunatics will throw every goddamn thing they can find of value out the window to make the margin calls stop.

Tue, 04/19/2011 - 14:37 | 1185035 sun tzu
sun tzu's picture

It depends on what they have to sell. Are they diversified into commodities? JPM is shorting silver while long on stocks. If they sell their silver shorts, silver goe sup while stocks collapse

Tue, 04/19/2011 - 13:26 | 1184712 virgilcaine
virgilcaine's picture

'ending cold turkey'  the stimulus, they admit its a junkie.  What a joke this Ctry is..

 

to Avoid ‘Cold Turkey’ End to Aid

 

Now line up at the Chipotle and get you 4 dollar burrito with beans and chipotle sauce. It's a complete meal in a wrap.lol

 

Tue, 04/19/2011 - 13:27 | 1184739 Cdad
Cdad's picture

Tyler,

Well, if it is only the second highest margin/leverage on record in the history of the world, what's the problem?  Things are great...or so people tell me as they pass by the cosmic bunny hole I'm stumbled down again.

I hear Goldman is considering upgrading Japan on Accelerated Isotope Growth Rates using a new Godzilla algorithm calculator.  Fuck, and I'm stuck here with the Mothra model.

 

Tue, 04/19/2011 - 14:02 | 1184889 treemagnet
treemagnet's picture

Cdad, you and SheepDog seem to know your stuff.  Is this 10:1 margin the answer to up days with bad news and no POMO or was there more to what Tyler was talking about regarding Benny and inkjets in the open market?

Tue, 04/19/2011 - 14:37 | 1184987 Cdad
Cdad's picture

Treemagnet,

I'm not sure if you should be asking investment advice from a guy who is stumbled down a cosmic bunny hole.  Look, there are freakin' gnomes down here.  Fuckin' A lil' dude, I thought you were dead.  Now, where was I?

Anyway, I rather think the leverage riddle is answered in a previous Tyler post where he documented that Goldman, despite being bullish while simultaneously sending Jan Hatzius out there to take down GDP expectations [you still with me Treemagnet?]...how Goldman's book was actually "risk off."  Well, ,that leverage level might ultimately speak to short positions being built up out there.  Nothin' gobbles up margin like short positions...and I should know.

But then again, I'm stumbled down this cosmic bunny hole, sweeping gnomes out from my feet, watching the S&P charge higher until RSI is hitting infinity as GOLD [you know, the barbaric metal that gets bought right before folk trade it for ammo?] hits an all freakin' time high...and Tim Jeethner goes out on the road trip to pimp T Bills while simultaneously suggesting that if the debt ceiling is NOT raised, all freakin' hell will break loose.  Now...if that ain't enough for you...the white iPhone is about to be released, at which time I suspect I'll be happy to be down this cosmic bunny hole because the entire globe will be crawling with zombies right after that event.

So what is an investor to do when a a bull run goes 2.5 years and Goldman goes all negative...well, that part is up to you as you'll have to assess your risk adjusted expectations for return on your investments.  Then again, if you are an investor in this market, you had best just cash out and buy UnicornDew futures before those babies get way from all of us.  Wave of the future, dude.

Nothin' eats up margin like a short position though....lawz yes.

Tue, 04/19/2011 - 21:56 | 1186550 StychoKiller
StychoKiller's picture

I, for one, welcome our Robot overlords -- I just refuse to do any trading with'em. :>D

Tue, 04/19/2011 - 13:36 | 1184774 GFORCE
GFORCE's picture

It's all setting up rather nicely. Extreme speculative positioning in every 'risk' asset going.

Tue, 04/19/2011 - 13:35 | 1184781 AmazingLarry
AmazingLarry's picture

Help a n00b here, the crossing over of the debt into the credit (red to black in the above graph) in the past two years indicates borrowed time running into borrowed money? 

Tue, 04/19/2011 - 14:46 | 1185064 topcallingtroll
topcallingtroll's picture

Maybe.borrowed money running out of time.

Tue, 04/19/2011 - 14:01 | 1184869 treemagnet
treemagnet's picture

How many bulls does it take to press "reset".

Totally off topic, any Seger fans out there?  Just listened to "Lock and Load", wow - very fitting for the times, give it a listen.

 

Tue, 04/19/2011 - 14:34 | 1185016 delivered
delivered's picture

Prefer Turn the Page by Seger as based on the latest margin data, its clearly time to turn the page. BTW and just a question to ponder, if a significant margin squeeze does consume the Street combined with the realization of a no bid market (which I know is a stretch with Big Ben and the Fed in the house), I'm wondering if the only assets left with demand present such as PMs, agriculture, and possibly oil will be hit with forced selling to cover margin calls in these paper markets? Any thoughts as I sure would like another entrance point in PMs to load up one last time.

 

Tue, 04/19/2011 - 14:43 | 1185048 topcallingtroll
topcallingtroll's picture

Horizontal Bop.

One of my favorites. Never gets played.

Tue, 04/19/2011 - 21:58 | 1186557 StychoKiller
StychoKiller's picture

Second that, "grass is good as carpet, anyplace is fine..."

Tue, 04/19/2011 - 14:47 | 1185075 treemagnet
treemagnet's picture

My view is everything not bolted down will be required to satisfy margin calls. As Cdad states, nothing eats margin faster than shorts - I think/hope theres a better PM price coming.  I've only begun with physical gold/silver - I think the bulls on margin will wait too long to cover out of blind faith the fed will do something - anything.  As I understand it, record long margin, lack of shorts, low cash for redemptions, insider selling...same deal, when it slips it will fall.  My take, not necessarily correct.  All opinions welcome.

Tue, 04/19/2011 - 14:37 | 1185037 gwar5
gwar5's picture

Half of the margin debt is RobotTrader's. He like. Know when to fold 'em.

Tue, 04/19/2011 - 15:08 | 1185144 Cash_is_Trash
Cash_is_Trash's picture

*Sigh.. Raise the margins....

Tue, 04/19/2011 - 15:14 | 1185166 Carnegie_IB
Carnegie_IB's picture

Been there, done that...

 

The mississippi scheme

http://en.wikipedia.org/wiki/Mississippi_Company

 

 

Tue, 04/19/2011 - 23:55 | 1186877 latizziforchizzi
latizziforchizzi's picture

$1500 Gold!! BOOM....

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