NYSE Margin Debt Plunges To Mid-2010 Levels, Still 60% Higher Than May 2009 Lows

Tyler Durden's picture

There was some good news for the bulls in the just released NYSE August margin debt update. Chief of these was that margin debt plunged from $306 billion to $272 billion in the past month, the lowest since the $270 billion in October 2010, which was to be expected considering the explosion in volatility of the last month. This means there are that fewer levered long positions that need liquidations/margin call collateral compliance. Another consequence of the market plunge in August was that Net Worth, or Margin Account credit balances, and Free Credit Cash accounts less Margin debt, the most direct proxy for levered beta pursuit, after hitting an all time low (negative net worth ) in May, has surged to nearly unchanged, or just ($4) billion, the most "unlevered" investors have been since June 2010. There is some bad news too however. And it is that at $272 billion in margin debt, there is still far, far more leverage in the market than at the market lows in March 2009, $99 billion or 56%  more to be specific, even as many of the economic and market indicators are back to those levels, and in some cases even before. In other words, people still refuse to believe that any market meltdown is for real. And once the margin calls start coming in, the convergence with the 666 on the SPX could come in a matter ot weeks if not days (and, courtesy of the ubiquity of HFT which can just slide the power switch to OFF nowadays, potentially hours).

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RunningMan's picture

But there is no way to know which direction the leverage is pointed up (long) or down (short). Is that right? That would matter I would expect.

junkyardjack's picture

I'm holding my capital waiting for the real deals, there's still a bit too much hopium in the system.  When people finally realize that stocks ran up because everyone thought the world was fixed and projected growth in the system whereas now everywhere you look things can only get worst there's going to be a massive dump in the market.  Gold has it right, there's a massive collapse coming

Sequitur's picture

Agree, sitting on sidelines, I own just a couple of strong utilities right now. They pay good dividend and wouldn't you know, they're practically even on this day.

Stumpy's picture

Look at AWK. Its been good to me.

Sequitur's picture

Thanks I will. Also take a look at AT, good yield plus some good deals in the works, it has pricing power and it's going to do well the next 24 months in this market.

svc101's picture

Unfortunately, you missed the article yesterday on the manipulation of gold (www.gata.org). They have now rigged it so that GLD (and real Au) is paralleling /ES and /YM.

Caviar Emptor's picture

Ten year note 1.75% !

Caviar Emptor's picture

Negative yield on the Ten would sure stump the econ profs :-)

mt paul's picture

i wouldn't buy the ten year treasurie bond 

if it was printed on bernankes skin ..

 

tattoo the ten year

Caviar Emptor's picture

CNBS Najarian sez buy the fear, FCX

HelluvaEngineer's picture

True, but maybe in about another 6 months.

Yardstick of Civilization's picture

Until there is a real domestic liquidity crisis that causes selling sufficient to overwhelm even short covering, I don't see how we get back to the 666 level in the near term, though I would love to see it (and would profit from it).  Otherwise, this selloff just doesn't feel like a real panic.

I'm betting that as large investors gradually sell their treasuries into Operation Twist, they will reinvest their proceeds in the equity markets, which will give equities a boost, though not as pronounced as QE 2.  The equity markets are just whining today because there is no LSAP component to what the Fed delivered yesterday.

RealitiveMind's picture

Rational evaluation . . . . but hard to ignore what's behind the curtain.

 

What is behind the curtain, any one care to add to the list?

1. Cloward-Piven

 

Caviar Emptor's picture

Taking proposition bets on 666 breach 

Sequitur's picture

All of this is healthy. I like this crash. Waiting on the sidelines with lots of cash, going to buy solid dividend payers once we hit DOW 7000.

Glad I sold out of some of my gold with profits. That may be the wrong-term move, but I said deflation and put my money where my mouth was by selling.

Caviar Emptor's picture

Sounds like a solid plan without a sovereign default or two along the way. Keep yer fingers crossed

That is to say provided the .gov reopens after closing. Lotsa Luck!

Clorox Cowboy's picture

At least you're honest about it.  Deflation has a shot...IF central bankers start sitting on their hands.  My bet has always been inflation, but we'll see...

Huckleberry Finn's picture

Don't laugh at an amateur, but I stumbled on ZH a few months ago after trying to find an alternative to the news from an obvious lame MSM. I have found an addiction to ZH, but I am entering health field(if there is one in the future) and no very little about finance. I have already learned quite a bit from ZH, but I was wondering if anyone had any suggestions on a book that teaches the basis of finance so that some articles would not seem like a foreign language

Dangertime's picture

Start with "War Cycles, Peace Cycles" by Richard Kelly Hoskins.

RealitiveMind's picture

I don't know Huck, you might save your gratitude until you have read it.  It would not be my first choice.  Can you articulate your knowledge of finance at this point?  It would be helpful.

Huckleberry Finn's picture

I know more than the average person. I understand the basic structure of our financial system, but when it comes to terms like puts, tech support, etc I am looking for explanation. Something to teach more of the trading aspect something like you would learn in your first or second semester of finance.

Dangertime's picture

War Cycles Peace Cycles is a book more about economic fundamentals that is easy to read.  But the message will tell you a lot on which sectors to invest in at what times in history.

 

It is actually one of the best books that helped me to go into gold during the tech crash.

 

If you are looking for technical information on trading, I would just suggest to read everything you can on the subject.  Perhaps start with investopedia.com.

Sequitur's picture

There will always be a future in health care. Follow the demographics, people getting older, you'll be all right.

Now, as for the bullshit part of medicine, not so much, this is coming to an end, because there is no more money. And you will quickly find out there is a lot of bullshit in medicine, any honest doctor will tell you so. Bullshit meaning: doing exepnsive, invasive procedures and operations on people 70+ years old, so that the physician's practicing group or hospital can bill bill bill Medicare, Medicaid, or the underwriter. Keeping people 90+ years old alive on treatments costing $100k a month. This is rampant in the healthcare system, and more docs are starting to speak out about it.

Huckleberry Finn's picture

Yeah, I agree the medical field is a mess. But can you blame doctors for the billing or the 100K procedures when medicaid pays 13 cents on the dollar? Malpractice is out of control. It's a government caused problem, and they make the doctors look like the bad guy. The truth is most elderly are nothing but a leech to society. Sounds harsh, I know.

Sequitur's picture

I agree with it. Search my posts, you'll see how I feel about these goddamn boomers -- they were the ones in charge as all of this debt was accumulated, housing pushed to stupid levels. Now the young are expected to fund boomers' retirement? Well F that.

It's why I haven't purchased a house -- to hell with paying some stupid boomer for a home at price levels of 5x average income.

 

RealitiveMind's picture

Wow Huck.  You sound very young and without life experience.  Are you sure the problem is the elderly?  Maybe healthcare is not the right field for you. 

Huckleberry Finn's picture

21. I wasn't looking at it through a moral issue rather an economical issue. I selected health care because I make the moral decision. But from a pure economical stance what benefit does a retired unproductive 80 year old provide to the economy? Seems they just collect ss, medicare, etc. I try and find some benefit because I want to, but there seems to be nothing. If you have something please educate the youth, that is why I am here. From the moral perspective would I want this person dead? Absolutely not.

fuu's picture

Somewhere around here is a primer/gloassary. I can't seem to find it right now though.

the grateful unemployed's picture

The books are currently being burned, you will deliver all currency to your local Federal Reserve charter bank where they will issue you the new script. All passports have been cancelled, unless its official government business. Your successor President will make a speech next Tuesday, the markets will be closed beginning Monday. Congress is in recess until further notice. Remember to obey any instructions you receive from a peace officer, or any duly authorized pentagon contractor.. We will be issuing a list of DOD authorized security contractor license numbers. Beginning Monday all power grid regions will have rotating blackouts to determine integrity of the security in place. Cell phones will continue to operate at the discretion of the carrier, and concurrent with the needs of local law enforcement.

This is not martial law. Remain calm.

Dangertime's picture

Not concerned.  This is a buying opportunity.  Especially in Copper.  FCX and TGB.

mt paul's picture

500 pt down day

for the dow...?

 

a walrus eater

can only hope..

Dapper Dan's picture

Is there a lot of volume?

http://jackjohnsonmusic.com/music/detail/sleepthroughthestatic/

JACK JOHNSON LYRICS

"All At Once"

All at once,
The world can overwhelm me
There's almost nothin' that you could tell me
That could ease my mind

Which way will you run
When it's always all around you
And the feelin' lost and found you again
A feelin' that we have no control
Around the sun
Some say
There's gonna be the new hell
Some say
It's still too early to tell
Some say
It really ain't no myth at all

Keep askin' ourselves are we really
Strong enough
There's so many things that we got
Too proud of
We're too proud of
We're too proud of

I wanna take the preconceived
Out from underneath your feet
We could shake it off
Instead we'll plant some seeds
We'll watch em' as they grow
And with each new beat
From your heart the roots grow deeper
The branches will they reach for what
Nobody really knows
But underneath it all
Theres this heart all alone

What about is gone
And it really won't be so long
Sometimes it feels like a heart is no place to be singin' from at all

Theres a world we've never seen
Theres still hope between the dreams
The weight of it all
Could blow away with a breeze
If you're waiting on the wind
Don't forget to breathe
Cause as the darkness gets deeper
We'll be sinkin as we reach for love
At least somethin we could hold
But I'll reach to you from where time just cant go

What about is gone
And it really wont be so long
Sometimes it feels like a heart is no place to be singin' from at all

bigDaddy's picture

Got to take a look at the y/y level of margin debt. Currently only 13% above last year. Get worried when it is up over 60% (got close in Feb at +40%, prior was June '07). Get excited margin debt is down 20% vs. year ago (last time was beginning Oct '08 to Nov '09). Still in no man's land, but getting better. Debt has been declining steadily since April '11 peak - down over 18%.

John McCloy's picture

They want that QE Crack Ben...Make a move and the Dow gets it !!

Edward Fiatski's picture

They might get it, in October, if the bubbles pop by another 15-20%.

John McCloy's picture

Yeah agreed..at least another 10% down likely 15%. 

kito's picture

tylers headline sounds very msmish..."still 60% higher than 2009 lows"!! ;)

Sequitur's picture

I'd remain on the sidelines until we have a much bigger drop. Those margin calls haven't come in yet. Eurozone pin hasn't even been pulled on the grenade. But it's coming.

When this thing blows, it's going to be spectacular. And we're going to have solid companies priced at the opportunity of our lifetimes. Fucking LOVE it.

Also, sold my GS and NFLX shorts way too early. I'm a horrible short termer on the downside, as I had major winning positions but let them go for too cheap (made some, could have made a lot more).

fdisk's picture

"In other words, people still refuse to believe that any market meltdown is for real." Too late to talk about meltdown, time to load up, while monkeys are selling.

Punks are probing 1120 now..

S&P yield more than 30 years treasuries, that was only
couple of times in history

bania's picture

donkey kong and/or deer... will we see either today?

Motorhead's picture

I don't get CNBC here.  How are those monkeys taking all this?  Oh, wait, it must be due to the weather...somewhere.

RealitiveMind's picture

Sorry, can't help you.  Mute button permanently activated.

bob_dabolina's picture

How come you never hear the peak oil maniacs on days like this? Oil is down 7% and it's crickets from that group