This page has been archived and commenting is disabled.
Margin Debt Breaks Out: Hits New Record 50% Higher Than Last Bubble Peak
For a few months in mid/late 2014 there was some concern among those who still don't get that in this New Paranormal market the only real buyers are central banks, that while the stock market kept on rising, and rising, NYSE margin debt was flat, and in fact the total amount of purchases on margin at the end of 2014 was nearly the same to those in January. Meanwhile the S&P 500 had soared to recorder highs.
A few things here: first, as we explained one year ago, in a world in which levered purchases take place via such shadow banking conduits as repo and primary broker arrangements, margin debt has become an anachronism from a bygone generation in which there wasn't $2.5 trillion in Fed reserves supporting the market, and is now almost entirely meaningless
But for those who still cling on to margin debt as indicative of anything, the latest NYSE report should provide some comfort: finally the long-awaited breakout in participation has arrived, and after stagnating for over a year, investors - mostly retail - are once again scrambling to buy stocks on margin, i.e., using debt, and as of April 30, the amount of margin debt just hit a new all time high of $507 billion, $30 billion more than the month before, and nearly 50% higher than the last bubble peak reached in October 2007.
It's not just margin debt that hit a record high. Investor net worth, which is the inverse, or investor cash and credit balances less total margin debt, just dropped to ($227 ) billion, a new record low, meaning not only is the amount of investors leverage at an all time high, but investor net worth is also at an all time low.
Why? Because there is one more thing that is at record highs. As we showed a few days ago, complacency has also never been higher now that market participants enter what Deutsche Bank dubbed the Mania phase of the market cycle.
Source: NYSE
»
- 22648 reads
- Printer-friendly version
- Send to friend
- advertisements -
If they manage to ban cash and push rates significantly negative, these bubbles will only get worse. They will still pop, like all bubbles, just from a higher level.
What could possibly go wrong?
This is what I have been waiting for. Now they will pull the credit and let the crash begin.
almost 100B of new margin debt in a few months, and stocks have gone nowhere. it wont even take a 10% correction to start wiping out a lof of funds.
That's what I've been expecting. The "market" will crumble like a house of cards and the elites will own a whole lot more equity.
Has anyone evere heard that Winston Churchill sailed over from England at the invitation of the Wall Street giants to see the crash live in October 1929? I would like to verify because thinking of the logistics, it required some advance planning.
I think I read in Galbraith, The Great Crash, 1929, that Churchill was in the public gallery of the New York Stock Exchange when things started to go pear-shaped.
But nothing suggesting that Churchill's presence in NY was anything other than chance.
Watson
Few good jobs so people gamble.
I'm sure it will all work itself out fine.
I know a fair amount of traders and the largest blog is Big Mike's trading.
It sure as hell can't be retail. So if big institutions are margin playing the marky it must be fed from the fed money.
I guess if you nedd to dominate to such an extreme then getting people in hot water then steal their shit is the way to go.
Yeah let it Give you some comfort while wall st rips your face off
The Debt Game is the only one in town.
I can understand why the sheeple are jumping in with both feet...do you think Yellen is going to raise rates after the news this morning?
Maybe Goldman should do something about that given that they want to fix the excessive debt problem.
"$2.5 trillion in Fed reserves supporting the market"
Because with so much leverage, it wouldn't take much of a downdraft to make the margin clerks reach for the phone. Stocks MUST go up, and they will, but not forever.
I wonder, how we will know when the time has come. Could it be to-day? I am sure we will know somw time after.....
have we started printing money for the next rescue? Billionaires can't go without!
When you know the margin call email is close to being triggered, delete that email account. Poof! No margin call.
Let the broker deal with the mess.
"We marginalized some folks."
"We margin-called some folks."
we hoodwinked some folk
"Retail" buying stocks NOW...? Aren't they a bit late to the party?
Retail late to the party........ never. Retail= bagholders.
I don't know when it will happen, but when this market does vaporize leverage like this will make it all the more spectacular. People never learn, the house always wins.
Margin calls suck.
Margin calls in a zero-liquidity meltdown suck even worse.
http://www.benzinga.com/news/15/05/5552748/margin-credit-rips-to-new-hig...
Breakouts are good, right?
"What difference does it make"?
look on us debt clock how much derivat market shrink.
off the topic-to me looks like usdjpy top is 124.60 and inverse corelation gold or silver made a bottom
When Greenspan said the market showed irrational exhuberance, he did not increase margin requirements.
When Yellen recently said the market is overvalued, she did not increase margin requirements.
Seems to be a pattern
Folks forget that (1) Greenspan was - and still is - a world-class nincompoop and (2) his famous quote was made on December 5, 1996 - years before the market top. If history repeats we've still got a few years of market froth ahead of us.
I would expect margin debt to rise in line with market asset values. Is margin debt as a percentage of stock market net worth higher than usual?
is the 2nd deriviative ramping higher?
BUY BUY BUY
It's tempting to go with the contraindication the 'retail investor' brings to this moment..
There's no reason they can't reduce margin requirements
You have to remember, no-one is responsible for their debts anymore.
Margin call, schmargin call.
This will just get worse and worse, they will all just double-down. Ther is no judgement day.
What a world.