e last addressed Margin debt back in September 2003.
At that time, we noted that margin was only modest, and represented little
danger to the market. As the chart below shows, Margin has scaled up
significantly. At present, while Margin debt is 20% below its 2000 peak, it’s
the highest it has been since early ‘01.
NYSE Member Firms’ Client Margin
click for larger chart
It is at the greatest spread relative to the Nasdaq since
the last time we last addressed the issue. Margin debt holds the additional
risk of “forced selling” into any further weakness. As we saw post-2000, the
daily liquidations exacerbated the downward movement as the markets collapsed.
Quote of the Day:
"I have no special talents. I am only passionately curious."