History shows that when investors experience a rapid decline in the amount of available cash in their brokerage account to spend/invest quickly such “negative net worth” leads to major corrections in the stock market. Currently such is the case so can we expect another such decline or will it be different this time?
So writes Chris Kimble (www.kimblechartingsolutions.com) in edited excerpts from his post* entitled Cash levels in Brokerage accounts approach lowest levels in history!
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Kimble goes on to say in further edited excerpts:
Negative Net Worth is defined as the amount of cash available to spend/invest quickly i.e. the net credit balance in one’s account consisting of free credit cash and credit balances in one’s margin account less one’s margin debt minus margin debt.
The chart below, created by Doug Short, reflects such a rapid decline in available cash/net worth this past month.
CLICK ON CHART TO ENLARGE
As can be seen in the chart above there were very few times over the past 13 years where negative net worth dropped as low as at present without a major drop in the S&P 500 following shortly thereafter. Will it be different this time?
Editor’s Note:The author’s views and conclusions are unaltered and no personal comments have been included to maintain the integrity of the original article. Furthermore, the views, conclusions and any recommendations offered in this article are not to be construed as an endorsement of such by the editor.
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