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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GeneMarchbanks's picture

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

BaBaBouy's picture

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

Wit Chief Bummah at the controls ...

DosZap's picture


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

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.

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.

Dr. Richard Head's picture

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

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.



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 

Oh regional Indian's picture

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

Very tricky times.


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 

Oh regional Indian's picture

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


Don Birnam's picture

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


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!

Tsar Pointless's picture

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

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.



LawsofPhysics's picture

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

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.

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.

dereksatkinson's picture

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

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.

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.

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.

Dr. Engali's picture

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

LawsofPhysics's picture

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

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.......

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?  

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.

Caviar Emptor's picture

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

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

11b40's picture

The artillery & adjust, fire & adjust.

Caviar Emptor's picture

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

slaughterer's picture

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

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



BlueStreet's picture

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






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

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?


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.


Oh regional Indian's picture

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


slaughterer's picture

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

sabra1's picture

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

d00daa's picture


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

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

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%

YesWeKahn's picture

Where is Robo and her long positions.

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).

slaughterer's picture

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

buzzsaw99's picture

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

SheepDog-One's picture

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