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Author of : - Greedometer. Dow 5000. Why nobody sees it coming. and - Greedometer 2.0. The rats are jumping ship. Engineer, Fee-Only Investment Advisor, CFP. Owner of Triangle Wealth Management Creator of the Greedometer algorithms
My company:
Triangle Wealth Management
My blog:
Triangle Wealth Management Blog
  • Greed Is Back, Baby!  0 comments
    Feb 27, 2013 5:41 PM

    Greed is Back!

    One of the 9 input parameters to the Greedometer algorithm is Margin Debt used on the NYSE. This is the amount of money borrowed from broker-dealers to invest "on margin". Margin debt exemplifies greed and is the inspiration for the Greedometer name because it peaks at secular stock market peaks. The all-time high margin debt figure was $381B in July 2007. At the time, it was also an all-time S&P500 peak. As we know, the market took a short breather then rallied a fraction of a % higher in October to a new all-time high, then proceeded to throw up for the next 1.5 years. Well folks, Greed is back! The NYSE released their January margin debt figures today (Yes, I know it's a month late. It's their data.) Margin debt for January 2013 was $364.1B. Given how the market has performed, it is a virtual certainty that February will see $380-385B in margin debt -- equaling or eclipsing the all-time high that was seen when the S&P500 was within 1% of the all-time high. If you had to write a script for a market crash pre-amble, it would include this attribute.

    (click to enlarge)Margin Debt peaks with market

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