In case you missed it, the New York Stock Exchange has now released the April number for the amount of margin debt held by NYSE member brokerage firms. And it came in at a new all-time high of $384.37 billion. The previous high was set in July 2007 at $381.37 billion.
After seeing the newly reported all-time high margin number, I thought about the different ways I could address the role that leverage and cheap money plays in pushing stock prices ever-higher. I finally decided to create the chart below because I think it eloquently shows what I (hopefully eloquently) would need 1,000 words to accurately and fully describe. Over the years, there has been an incredible correlation between NYSE margin debt and the major market averages. I chose to show that correlation with the S&P 500 (SPY), but even if you are invested in funds tracking the Dow Jones Industrial Average (DIA), the Nasdaq 100 (QQQ), the Russell 2000 (IWM), or a total stock market ETF such as Vanguard's VTI, you should be aware that the performance of your invested capital is also likely to closely track the amount of margin debt held by NYSE member brokerage firms.
Without further ado, I present a chart of which I think every investor should be aware. If only I knew how to accurately predict the future direction of margin debt.