Thursday, February 22, 2007

Another Stock Market Record...for Margin Debt Levels

Here's a data point to make you stop and think: As of today, more people have borrowed money from their their brokers to buy stocks than ever before.

That number was reached this past month, with Margin debt hitting an all-time high, passing even the days of the tech/telecom/internet boom.

According to the NYSE, margin totaled $285.61 billion in January, up from $275.38 billion in December and passing the previous peak of $278.53 billion.

As Barry says:

Fascinating stuff. None of this stuff matters, until it does. Than it matters a whole lot.

I previously asked Is this what is keeping the market up? It provided a link to the previous all-time high records of margin debt.

Barry Ritholtz gives 4 other things to consider:

• The VIX, commonly known as the “fear index,” is hovering around 10, a low point, suggesting a lot of carefree folks out there these days. This level is often a turning point, a calm before the storm, so to speak.

• The Treasury yield curve inverted months ago, suggesting a recession was on the way. It hasn’t happened.

• The Dow industrials, transports and utilities all closed at new highs on the same day last week — something that became a routine occurrence in just two years, 1929 and 1986, both preludes to big market falloffs.

• The current rally is now the third longest since 1900 without a 10% correction.

Click on the title to read the rest of Barry's post at the Big Picture.

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