Margin Debt Declines Sharply

I remember this particular financial statistic causing a lot of hand-wringing a few months back when it hit a record high. Since then the record high has been abandoned and the statistic sits at a level that is ~14% from the all-time high. Then again, I don't pay much attention to the financial news so maybe I missed somebody discussing it.

The "it" I'm referring to is the level of margin debt on the NYSE. After reaching a nominal (it is not adjusted for inflation or otherwise) high of $381.37B in July 2007, the latest reported figure is $329.51B for the month of September 2007. I don't know about you, but a 14% decline in just 2 months is something that gets my attention.

What does this portend for the stock market? I dunno, feel free to discuss amongst yourselves. I will point out, however, that the last nominal high was $278.53B reached in March 2000 (a pretty good time to sell stocks) and reached a nadir of $134.03B in February 2003 (a pretty good time to buy stocks).

Meanwhile, more to the here and now, I suspect we are in the midst of a selling stampede that began a few weeks ago and probably has some more to go.

Comments

[wixeywaxy:]

My son who is tuned to the condition of small manufacturers as a marketer of basic materials widely used tells me that he is experiencing an exceptionally slow period due to so many company's cutting back purchasing and reducing staff. That isn't showing up in the Gov't Stats but I'm inclined to think what he is finding is a significant picture of small business problems. WW

2007 Nov 05 02:26 PM

[Vlad Khandros:]

Paul -

Margin accounts are required for those holding short positions. Margin debt rose as stocks were hitting new lows back in March of 2000 and also during this past summer. Substanital amounts of the record volatility and volume from a few months ago can be attributed to these accounts getting margin calls. The Wall Street Journal publishes these statistics regularly so perhaps that is why you have not seen much talk of this as of late - however there was a great deal of focus on this around July and August of this year.

2007 Nov 06 01:04 AM