It doesn’t matter until it matters! IF margin debt should start decreasing swiftly, history would suggest something different is taking place in the mind of aggressive investors. Will a decline in margin debt from all-time highs matter this time?
The following article is presented by Lorimer Wilson, editor of www.munKNEE.com (Your Key to Making Money!), www.FinancialArticleSummariesToday.com (A site for sore eyes and inquisitive minds) and the FREE Market Intelligence Report newsletter (sample here; register here) and has been edited, abridged and/or reformatted (some sub-titles and bold/italics emphases) for the sake of clarity and brevity to ensure a fast and easy read. This paragraph must be included in any article re-posting to avoid copyright infringement.
Kimble goes on to say in further edited excerpts:
In the past margin debt at historical levels didn’t seem to matter, until margin debt started decreasing. The chart below (courtesy of Doug Short – original article**) highlights that at each (1), margin debt was at historical highs and then turned south and the S&P 500 soon followed.
…Margin debt has been swiftly pushing higher for the past 8 months in a row and now slipped a little this past month. IF….IF margin debt should start decreasing swiftly, history would suggest something different is taking place in the mind of aggressive investors.
Editor’s Note: The author’s views and conclusions in the above article are unaltered and no personal comments have been included to maintain the integrity of the original post. Furthermore, the views, conclusions and any recommendations offered in this article are not to be construed as an endorsement of such by the editor.
*http://blog.kimblechartingsolutions.com/2014/05/margin-debt-takes-a-turn-from-all-time-high-levels-be-concerned **http://advisorperspectives.com/dshort/updates/NYSE-Margin-Debt-and-the-SPX.php ((© Copyright 2014, Advisor Perspectives, Inc. All rights reserved.)
Is the latest credit-balance trough a definitive warning for U.S. equities? In this article we examine the numbers and study the relationship between margin debt and the market, using the S&P 500 as the surrogate for the latter. Read More »
Are stocks in a bubble? While leverage has returned to the stock market driving up stock prices and aggregate demand in the process, margin debt is still shy of its all-time high as a percentage of GDP, so there is certainly some headroom for further rises. A look at the following 5 charts illustrate that contention quite clearly. Read More »
Some times in history, investors feel so confident about the future of stocks, they actually use up all their available cash and then borrow money to invest in the stock market. Now is one of those times – and it suggests that now is the time to lower one’s stock exposure. Here’s why. Read More »
Buying on margin can mean potentially higher returns – but it can also lead to large losses very fast. [This article outlines 6 things to know about buying on margin and 3 key risks of doing so.] Words: 848 Read More »