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 [5], 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.
[6]
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 [7] the Mania phase of the market cycle.
[8]
Source: NYSE [9] [9]
