NYSE Margin Debt At Highest Since July Means Threat Of Margin Calls High

Tyler Durden's picture


As so often happens, every time there is a ramp in the stock market, especially one which is not accompanied by retail buying, those who are buying, are forced to do so on increasingly more margin, as there is only so much cash in the market without booking actual profits. Sure enough, as of the end of February, margin debt was $289 billion, the highest since July 2011, while Net Free Credit (Free Credit Cash plus Credit balances in margin accounts less Margin Debt) of negative $33 billion (meaning investors have negative net worth) was the lowest also since July. What does this mean? Simply said, that if the cross asset rout continues, which means bonds yesterday, and stocks and commodities today, the margin calls will once again resume, as they used to in the fall of 2011, leading to a toxic liquidation spiral, pushing prices even lower. So in keeping with the times, and sticking heads in the sand, watch out for that 3pm call from your repo desk. Best idea would be to just let it go through to voicemail.

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Wed, 04/04/2012 - 10:42 | 2316314 Mr Lennon Hendrix
Mr Lennon Hendrix's picture

Global margin call, bitchez!

Wed, 04/04/2012 - 10:48 | 2316351 mayhem_korner
mayhem_korner's picture



Ben doesn't provide the promised liquidity, so the traders make their own by liquidating what they can (esp. Au).  Nasty little quid pro quo.

Wed, 04/04/2012 - 10:41 | 2316316 dwdollar
dwdollar's picture

I hope to see "deer in headlights" soon.

Wed, 04/04/2012 - 10:43 | 2316327 LawsofPhysics
LawsofPhysics's picture

Still think much of today's action is simply strong dollar, people running to cash (albeit short term).  Watch the soveign bond auctions.

Wed, 04/04/2012 - 10:44 | 2316335 Hansel
Hansel's picture

AAPL is the cheapest it's ever been since YESTERDAY.  BNOBPOF (buy now or be priced out forever)

Wed, 04/04/2012 - 10:49 | 2316355 Village Smithy
Village Smithy's picture

Yeah, my brother-in-law thought that about the house he bought in 2007.

Wed, 04/04/2012 - 10:50 | 2316357 Quinvarius
Quinvarius's picture

Not doing any fundamental analysis, all I can say about AAPL's chart is that nothing goes straight up and stays up...except the US money supply.

Wed, 04/04/2012 - 10:48 | 2316343 Nid
Nid's picture

And how's that Short Interest looking?

Different this time???

Wed, 04/04/2012 - 10:48 | 2316345 Dr. Engali
Dr. Engali's picture

I wonder who will blow up this time.

Wed, 04/04/2012 - 10:48 | 2316349 Village Smithy
Village Smithy's picture

That's the problem when everything is ramped up for the same reason, free money. When the party's over there is nowhere to hide and everyone wants out of everything, all at once. At least until there is some more free money.


Wed, 04/04/2012 - 10:50 | 2316359 navy62802
navy62802's picture

It's almost gold-buying time again! Woohoo!

Wed, 04/04/2012 - 10:50 | 2316360 GoldenGal
GoldenGal's picture

So is Gold doomed?????????????

Wed, 04/04/2012 - 11:01 | 2316398 navy62802
navy62802's picture

By "gold" do you mean the global economy? If so, then yes.

Wed, 04/04/2012 - 10:50 | 2316361 apberusdisvet
apberusdisvet's picture

Final shearing of the sheeple coming in 5...4...3...2.....!  All orchestrated and planned.  Must.........happen........before........Obama's.............illegal alien status................is.....................fully....................exposed.

Wed, 04/04/2012 - 10:52 | 2316367 GoldenGal
GoldenGal's picture

And what planet is Obama from, really?

Wed, 04/04/2012 - 10:52 | 2316370 LongSoupLine
LongSoupLine's picture

Greed+Stupidity=Margin Use

Wed, 04/04/2012 - 10:53 | 2316373 JohnKozac
JohnKozac's picture

S&P will drop back to 1,200 Faber said last week....maybe so...maybe so....

Wed, 04/04/2012 - 11:01 | 2316400 my puppy for prez
my puppy for prez's picture

Is this what could be called a "crack" that could break open, and how does this relate to the "health" of the derivitives mkt?  Could margin calls trigger an implosion of the derivitives mkt?

Wed, 04/04/2012 - 11:06 | 2316415 Quinvarius
Quinvarius's picture

I would bet on a 250 trillion bailout before I bet on the derivatives market failing. 

Wed, 04/04/2012 - 11:01 | 2316402 ekm
ekm's picture

Any idea who made BAC go 100% higher in 11 weeks from DEC 2011, and of course on Margin?

I'd say Merryll Lynch.

Wed, 04/04/2012 - 11:03 | 2316408 monopoly
monopoly's picture

Good day to raise confetti. And, few here if any, ever buy on margin. That is death.

Wed, 04/04/2012 - 11:15 | 2316448 SillySalesmanQu...
SillySalesmanQuestion's picture

Go get some liquidity now you maniacal, leveraged, trading bitchez...and none of that funny money from Ben and the FED. Noooo....iPads don't qualify either...

Wed, 04/04/2012 - 11:22 | 2316469 q99x2
q99x2's picture

Jump banker jump. Save yourself the humility.

Let the show begin.

Wed, 04/04/2012 - 11:24 | 2316489 junkyardjack
junkyardjack's picture

Ruh Roh Raggy

Wed, 04/04/2012 - 11:37 | 2316530 Waterfallsparkles
Waterfallsparkles's picture

That is what I think has propelled this market.  As the value of the Stocks went up the Marginablity of the Stocks went up.  The Funds then used this increased Margin to Buy more and more Stocks.  But, if Stocks drop this will cause a huge cascade in the value of the Stocks on their Balance Sheet and the Marginablilty of those Stocks.  Hense a huge cascading Sell Off as Margin Calls come in.

Wed, 04/04/2012 - 12:39 | 2316784 YesWeKahn
YesWeKahn's picture

Unfortunately, shorts can't help this time. They've been out.

Wed, 04/04/2012 - 12:58 | 2316852 markalpha
markalpha's picture

The market needs to go down so the FED can justify QEIII or a continuation of Twist. There was no way they could turn on the printers with Crude at 105, DOW 13,300, Europe Stabilizing, and improving employment data.

Did anyone else notice that as soon as the fed said the economy was improving suddenly all of the economic data started missing?

Wed, 04/04/2012 - 14:12 | 2317150 jcaz
jcaz's picture

Feh- margin is also up because tools like me are short,  which is also in that number....

Still,  I do love the sound of a margin call on some of this over-pumped garbage......

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