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Margin Debt Soars By Most Since June 2007 Just In Time For November Market Rout

Tyler Durden's picture


And so the wave of beta chasers has once again be caught flat footed. Following the 11% jump in the S&P, hedge funds, which are now down 2% YTD (more on that shortly) and getting killed with redemption requests, it was only natural that in focusing solely on performance and not on fundamentals, that margin debt would increase. Sure enough, the NYSE has reported that in October, margin debt jumped by $21 billion, the most since June 2007's $25 billion... just in time for the market rout. And as funds levered up yet again, net worth, which nets out free credit cash accounts and cash balances in margin accounts, plunged by $46 billion, the most since the Lehman collapse which saw net worth implode by $184 billion. And just as the market ramped for no reason in October, it has now already retraced almost half the gains in the prior month. Oops.

And the stock market performance in the past two months:

chart: Bloomberg


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Mon, 11/21/2011 - 12:49 | 1898947 GeneMarchbanks
GeneMarchbanks's picture

Lehman was the overture. The full blown Pavoritti-esque Opera about to be unleashed...

Mon, 11/21/2011 - 12:54 | 1898963 BaBaBouy
BaBaBouy's picture

Likes I says, they is wants to takes The's Financial System DOWN ...

Wit Chief Bummah at the controls ...

Mon, 11/21/2011 - 13:20 | 1899113 DosZap
DosZap's picture


Yes sir, only then can the Man of Perdition come into view.

Mon, 11/21/2011 - 13:31 | 1899127 TruthInSunshine
TruthInSunshine's picture

Do Not Fret!

The Water Iz Ze Fine!


A Greek econoblogger (it takes a Greek to know a Greek tragedy) is claiming that The Bernank's alleged not seeking and/or not being re-confirmed as Fed Head ever again is proof that The Bernank is going to bail the EU out with U.S. taxpayer dollars.

Ben Bernanke and the Federal Reserve [will] bail out Europe




If The Bernank even hints at this, let alone tries it, place your bets on whether tea party members or OWS members get to him first and "handle him pretty ugly." 

Seeking or getting re-confirmation of the Lamprey-esque Federal Reserve Ponzi Perpuation Machine will be the least of The Bernank's concerns.

Mon, 11/21/2011 - 12:53 | 1898987 EL INDIO
EL INDIO's picture

I can hear the V overture but I’m not sure if the bang is about to occur or is occurring or has occurred.

Mon, 11/21/2011 - 12:58 | 1899019 Dr. Richard Head
Dr. Richard Head's picture

You see?  That is why fat ladies are good for more things than just whaling and blow jobs.

Mon, 11/21/2011 - 13:16 | 1899100 Oh regional Indian
Oh regional Indian's picture

Hedge funds imploding in harmony? Who would have thunk that? Maybe Thelonius might have.

Hedge Funds are all dark pool money with a sprinkling of risk monies from retirement funds etc. All off-shore, all Dark.

They are (many of th ebig ones) govt. slush fund operators.

Hedge Funds, the monetary vaccum cleaners fro TPB. Let them implode.



Mon, 11/21/2011 - 13:22 | 1899125 Caviar Emptor
Caviar Emptor's picture


Here's an article showing how alpha has absolutely impoded to zero :

correlation between hedge fund returns and the S&P 500 has risen to nearly 100% in the past couple of years 

Mon, 11/21/2011 - 13:27 | 1899153 Oh regional Indian
Oh regional Indian's picture

Thanks CE, interesting link. so the CALPERS/TIAACREF herd will try and exit stage left quickly. 

Very tricky times.


Mon, 11/21/2011 - 13:34 | 1899179 Caviar Emptor
Caviar Emptor's picture

My guess is you're right. And I think there's going to be another huge wave of consolidation. 

I remember back around 03 when financial news articles covered the mass expansion of silly hedge funds when any moron could get capital 

Mon, 11/21/2011 - 13:44 | 1899213 Oh regional Indian
Oh regional Indian's picture

I was in the Silly Con Valley from 1999 through 2003 (active), imagine what I saw! :-)


Mon, 11/21/2011 - 13:21 | 1899118 Don Birnam
Don Birnam's picture

There is but one opera to describe this market, now in its twilight, and its fate...


Mon, 11/21/2011 - 14:29 | 1899377 Eurodollar
Eurodollar's picture

Got to wait until Goldman Sachs have manouvered themselves perfectly into position :) Then they screw their competitors with a 12" sledgehammer (Actual Italian or Greek default triggering CDS claims) and make sure governments will pay them top dollars into perpetuity.. Life is good if you got the golden touch!

Mon, 11/21/2011 - 12:47 | 1898950 Tsar Pointless
Tsar Pointless's picture

"Mr. Margin - call for you from Reality on Line 1."

Mon, 11/21/2011 - 12:50 | 1898953 TruthInSunshine
TruthInSunshine's picture

It's just margin debt.

It's not like there's a systemic unraveling underway and that there's a significant possibility that margin calls, en masse, outdoing anything seen in 2008-2009, are in the offing.

Besides, most of those now caught highly leveraged in toxic stew assets that there's no market for have ensured they have inherently valuable assets to offload, in order to meet those margin calls, if they ever did come in.



Mon, 11/21/2011 - 12:52 | 1898978 LawsofPhysics
LawsofPhysics's picture

You speak as if we are witnessing the movements of a free and completely unmanipulated market where fundamentals matter.

Mon, 11/21/2011 - 12:57 | 1899016 TruthInSunshine
TruthInSunshine's picture

I finally speak with the degree of confidence that they've lost control of the Ponzi Train, and I now see The Bernank (at least implicitly) blaming Congress, some in Congress blaming The Bernank or Obama, and Obama silent, as eveything melts down.

I also see that the ECB literally is hanging on to the bed post, refusing to be dragged out into the EU square of sunlight, knowing that the puppet masters of Goldman Squid & JP Morgue are going to try and paint it as the fall guy.

Mon, 11/21/2011 - 12:55 | 1899000 CPL
CPL's picture

it's an indicator that the retail end of investment is about to go shit the bed.


Most people though will just pound the sell button by proxy of a stop loss or just plain old FUD.

Mon, 11/21/2011 - 12:48 | 1898955 dereksatkinson
dereksatkinson's picture

What about short interest levels?  That is part of the margin equation.

Mon, 11/21/2011 - 13:23 | 1899132 CPL
CPL's picture

it is but the margin required for shorting is usually a one for one, as in I have a buck of capital I have a buck of credit.

Mon, 11/21/2011 - 12:49 | 1898958 YesWeKahn
YesWeKahn's picture

Love to know how much of that is margins taken out by the shorts.

But, the market is in free fall mode nonetheless.

Mon, 11/21/2011 - 12:54 | 1898994 dereksatkinson
dereksatkinson's picture

I think some short covering is happening in the Euro.  realistically, news flow couldn't be worse for the euro yet it's not breaking.  In general, that is a good contrarian indicator.  Maybe it gets a little bounce here and we see the trend reassert itself early next year.

Mon, 11/21/2011 - 12:50 | 1898966 Dr. Engali
Dr. Engali's picture

Man these people are funny to watch. They just can't stay away from the crack pipe.

Mon, 11/21/2011 - 12:50 | 1898968 LawsofPhysics
LawsofPhysics's picture

Ah! my eyes! my eyes!  make it stop!  Just kidding, got physical assets?  you better.

Mon, 11/21/2011 - 12:50 | 1898969 jcaz
jcaz's picture

Ya well, margin works both ways-  I'm short, paying margin, so not sure that's the best indicator.... 

But I do like that net worth number, that's yummy.......

Mon, 11/21/2011 - 12:52 | 1898977 slaughterer
slaughterer's picture

What are the chances that the super-committee surprises the market and reaches a well-thought-out agreement?   .0001%? or .00001%  Can I lever that up 10,000 times?  

Mon, 11/21/2011 - 12:54 | 1898997 Spastica Rex
Spastica Rex's picture

Intriguing bet.

Mon, 11/21/2011 - 12:57 | 1899014 dereksatkinson
dereksatkinson's picture

I've seen a few different sources say that the market is pricing in a 20% chance they get a deal done by wednesday.  I think that is a bit high personally..

Although, sentiment is so negative right now and expectations are so low that any deal (even a shitty one) could get us a bit of a rally.

Mon, 11/21/2011 - 12:59 | 1899028 Caviar Emptor
Caviar Emptor's picture

They have to post agreements for 2 days minimum before the deadline. So the deadline ahs effectively passed

Mon, 11/21/2011 - 12:53 | 1898989 prains
prains's picture

creeping barrage -  is a line or barrier of exploding artillery shells, created by the co-ordinated aiming of a large number of guns firing continuously. Its purpose is to deny or hamper enemy passage through the line of the barrage, to attack a linear position such as a line of trenches.


everyday ask yourself are the shells coming at me of away from me

Mon, 11/21/2011 - 16:20 | 1899871 11b40
11b40's picture

The artillery & adjust, fire & adjust.

Mon, 11/21/2011 - 12:54 | 1898996 Caviar Emptor
Caviar Emptor's picture

Look, I'm not worried about margin. Everything will get bailed out any minute now....just chill /snark

Mon, 11/21/2011 - 12:58 | 1898999 slaughterer
slaughterer's picture

Let's get Obama on the TV to crash the market more!  The CongressCreatureBearArmy™ wants their SPY puts to double today.  

Mon, 11/21/2011 - 12:55 | 1899001 d00daa
d00daa's picture

"It's official.  The crisis is over."   -  RobotTrader

"The market isn't pricing in QE3.  The market is pricing in an economic boom, led by the US consumer."  -   RobotTrader



Mon, 11/21/2011 - 13:06 | 1899061 brew
brew's picture

now it's time for some wisdom from million$$$bonus...

Mon, 11/21/2011 - 12:55 | 1899004 BlueStreet
BlueStreet's picture

Maybe Paulson will hit -50% this month.  Too bad Johnny.  






Mon, 11/21/2011 - 12:56 | 1899009 AssFire
AssFire's picture

Dear God,

Please let this be the begining of the final collapse and the end of the new world order.


Devout Atheist

Mon, 11/21/2011 - 13:16 | 1899099 onarga74
onarga74's picture

Dear Atheist,

Your request has been forwarded to Ben Bernanke.  He is the one I go to when I need a world shaking multi-national economic collapse.  By the way...don't buy any gold.


P.S. How did you find my address?


Mon, 11/21/2011 - 13:26 | 1899147 DosZap
DosZap's picture


Devout atheist, sorry but GOD is just bringing in the beginning of it, and then shorly therafter the REAL end.

And to think most folks think this is /was an ACCIDENT, or an act of greed, and oversight.

Rude awakening coming.

Real RUDE.


Mon, 11/21/2011 - 14:03 | 1899284 Oh regional Indian
Oh regional Indian's picture

Hey Assfire, thanks for the poll the other day. Awesome reality check for me.


Mon, 11/21/2011 - 12:57 | 1899010 slaughterer
slaughterer's picture

RobotTrader will be appearing on FastMoney tonight to advocate the technical reasons for the BTFD trade today.  

Mon, 11/21/2011 - 13:00 | 1899032 sabra1
sabra1's picture

actually, he was on last week, "How to Make a Killing in Your Practice Account!."

Mon, 11/21/2011 - 12:57 | 1899011 d00daa
d00daa's picture


NO ARMAGEDDON?????????????

BORING WORLD WE LIVE IN??????????????????????

Mon, 11/21/2011 - 12:58 | 1899022 Caviar Emptor
Caviar Emptor's picture

Signs of market schizophrenia: 

3 month performance for service sector +4%

3 month performance for financials -5%, consumer goods and basic materials -2.5%

Mon, 11/21/2011 - 12:59 | 1899027 YesWeKahn
YesWeKahn's picture

Where is Robo and her long positions.

Mon, 11/21/2011 - 13:13 | 1899088 TruthInSunshine
TruthInSunshine's picture

Robo furiously smashed his piggy bank and went long Italian bonds on Thursday.

We'll only hear him confirm this when rainbows & skittles shoot forth from all of our asses if Italy doesn't default in one way or another (and Italy is going to default, because after even a short analysis, Mr. Math says so).

Mon, 11/21/2011 - 13:00 | 1899033 slaughterer
slaughterer's picture

This is Congress's and Wall Street's way of saying to America: HAPPY THANKSGIVING.  

Mon, 11/21/2011 - 13:04 | 1899053 buzzsaw99
buzzsaw99's picture

Does this mean that GS is a "generational buy"?

Mon, 11/21/2011 - 13:06 | 1899062 SheepDog-One
SheepDog-One's picture

Wheres Robo! Im feelin a hankerin to go all in on a new momo stock!

Mon, 11/21/2011 - 13:09 | 1899076 HD
HD's picture

Cocky perma bulls always disappear when the market doesn't go their way. On even the smallest bounce he'll be back calling us fear mongers.

Mon, 11/21/2011 - 13:27 | 1899151 Robot Trader's ...
Robot Trader's brother's picture

My idiot brother will be back here when the market bounces up a bit.

He has no comment today...

Mon, 11/21/2011 - 13:06 | 1899063 Dapper Dan
Dapper Dan's picture

I don't know if it was really Paul Krugman last night on the Man Arrested in NY thread, but

I would love to hear his comments on this story concerning margin debt.

From last night. 

Sun, 11/20/2011 - 19:07 | 1896959 Dr Paul Krugman
Vote up!

Vote down!


This fascination for collapse is mind boggling! What will change that will "collapse" the system?

Mon, 11/21/2011 - 13:21 | 1899119 Dapper Dan
Dapper Dan's picture

Up date on NY story:

@NBCNewYork FBI declined to pursue case against accused NYC bomb plotter.
Mon, 11/21/2011 - 13:07 | 1899068 HD
HD's picture

I can't tell you how many retail perma bulls are just now starting to see reality - I hope they enjoyed ignoring fundamentals for three years.

I would feel bad for their willful ignorance if they weren't so unbelievably obnoxious...

Mon, 11/21/2011 - 13:24 | 1899078 Caviar Emptor
Caviar Emptor's picture

Newt got it right: employ high school kids as school janitors. 

I go a step further: employ middlle school kids as undercover cops in sting operations

Newt makes sense for America. 


Mon, 11/21/2011 - 13:15 | 1899097 1835jackson
1835jackson's picture

Wait for 1000 pt drop at 4.29pm today.

Mon, 11/21/2011 - 13:17 | 1899103 electricgorilla
electricgorilla's picture

Euro is actually up. Gold and Silver getting hammered. 10 year treasury is slightly up which is suprising. 10 year notes usually go parabolic on strong down days on the Dow. The Japanese Yen is virtually un-responsive on a typical flight to safety day. Some serious decoupling going on here. If they say "until death do us part" than the market is the marriage and death is around the corner knocking heavily on the front door.

-don't jump-

Mon, 11/21/2011 - 13:23 | 1899130 slaughterer
slaughterer's picture

Major decoupling today means that this will be an entirely new market going forward.  We do not yet know the correlations of the new market.  Anyone care to guess?

Mon, 11/21/2011 - 13:21 | 1899108 monopoly
monopoly's picture

I think most of us here would just like to see this over with. Lets crash, 666, blow out Congress, get a real person elected as president, take the pain and then start over. At least then, our children would have a chance. 

Imagine what would the averages look like if we had a real panic sell-off. 300 points, just a correction. So tired of all this bull shit from incompetent fools running our govt, tresury and federal reserve.



Mon, 11/21/2011 - 13:23 | 1899131 tahoebumsmith
tahoebumsmith's picture

I got some advice for ROBO seeing how he always has advice for us. ROBO get the hell out of LA. When this train wreck hits and the dollar collapses you are in the war zone... When all your neighbors don't get their snap money they are going to take to the streets in mass. So all I got to say is pack your shit and get out while you still can...

Mon, 11/21/2011 - 13:25 | 1899141 stop.snitching
stop.snitching's picture

I hope the clowns on CNBC bring Mr. Bove back for some important insight today. Lol.

Mon, 11/21/2011 - 13:25 | 1899144 Mark123
Mark123's picture

Keep in mind that the PPT wants a Christmas rally (it is their God given right after all)....if there is a real plunge there will be riots in the streets after they shower themselves with massive year end bonus's.  So I am thinking we get one more big announcement out of Europe to goose this market and really suck the last few $'s out of the shorts.


That said, I am scratching my head trying to think what they can announce that makes any sense (even if they never intend to implement it).  Any ideas?


The consensus is that the ECB announces it will monetize debt on a big scale.  To me, that signals the end of Fiat system and so not sure the bankers will risk killing their golden goose.

Mon, 11/21/2011 - 13:31 | 1899164 Caviar Emptor
Caviar Emptor's picture

The deal which existed since March 09 was blanket bailouts for TBTF institutions. Including sovereigns. Money would be printed and thrown at anything that threatened the Ponzi. 

But today that deal is clearly off. As always, it starts with just a few little cracks: Greek bond haircuts and MF Global implosion. Today the grand follow-up is the dual political discord across the pond: Eurozone unable to agree on standing sovereign bond backstops and US Congress unable to agree on debt reduciton details. 

Where once there was an 800lb gorilla, there's now just a monkey

Mon, 11/21/2011 - 13:45 | 1899216 topcallingtroll
topcallingtroll's picture

EWZ limit order 57.10 filled.

Did I just catch the low?

Let the ramp begin!!!

Mon, 11/21/2011 - 13:46 | 1899221 Georgesblog
Georgesblog's picture

How many times do people have to get kicked in the teeth, before they run out of teeth?

Mon, 11/21/2011 - 13:50 | 1899230 cbxer55
cbxer55's picture

Off topic, I know.


BACs back in the fives again, 5.58.   ;-)


Mon, 11/21/2011 - 14:04 | 1899289 buzzsaw99
buzzsaw99's picture

That's still about $5 too high.

Mon, 11/21/2011 - 17:28 | 1900123 imsaul0968
imsaul0968's picture


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