Record margin debt for the stock market, while the stock market threatens to go down. If the stock market does go down, there will be a domino effect of “margin calls” where people who borrowed “on margin” to buy stock will get a “margin call” to pay back these debts, and then things get really interesting.
NEW YORK – Borrowing money from stock brokers to buy stocks has now hit an all-time high, triggering fears of a downward market adjustment and a collapse of the brokerage-made loan market investors typically use to fuel continued bull market growth.
Data published by the New York Stock Exchange at the end of March shows margin debt – the loans made by stock brokers to permit investor clients to buy stocks on credit – has reached a record high of $466 billion, approaching for the first time a half-trillion dollars.
Analysis of NYSE margin debt shows previous peaks have foreshadowed severe market corrections.
It happened in the summer of 2000 just before the dot.com stock market crash and in the summer of 2007, preceding the bursting of the housing bubble that caused the dramatic economic downturn that began in 2008.
Stock market technical analysts have recently drawn attention to the…
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