Most Popular
1. Banking Crisis is Stocks Bull Market Buying Opportunity - Nadeem_Walayat
2.The Crypto Signal for the Precious Metals Market - P_Radomski_CFA
3. One Possible Outcome to a New World Order - Raymond_Matison
4.Nvidia Blow Off Top - Flying High like the Phoenix too Close to the Sun - Nadeem_Walayat
5. Apple AAPL Stock Trend and Earnings Analysis - Nadeem_Walayat
6.AI, Stocks, and Gold Stocks – Connected After All - P_Radomski_CFA
7.Stock Market CHEAT SHEET - - Nadeem_Walayat
8.US Debt Ceiling Crisis Smoke and Mirrors Circus - Nadeem_Walayat
9.Silver Price May Explode - Avi_Gilburt
10.More US Banks Could Collapse -- A Lot More- EWI
Last 7 days
Stock Market Volatility (VIX) - 25th Mar 24
Stock Market Investor Sentiment - 25th Mar 24
The Federal Reserve Didn't Do Anything But It Had Plenty to Say - 25th Mar 24
Stock Market Breadth - 24th Mar 24
Stock Market Margin Debt Indicator - 24th Mar 24
It’s Easy to Scream Stocks Bubble! - 24th Mar 24
Stocks: What to Make of All This Insider Selling- 24th Mar 24
Money Supply Continues To Fall, Economy Worsens – Investors Don’t Care - 24th Mar 24
Get an Edge in the Crypto Market with Order Flow - 24th Mar 24
US Presidential Election Cycle and Recessions - 18th Mar 24
US Recession Already Happened in 2022! - 18th Mar 24
AI can now remember everything you say - 18th Mar 24
Bitcoin Crypto Mania 2024 - MicroStrategy MSTR Blow off Top! - 14th Mar 24
Bitcoin Gravy Train Trend Forecast 2024 - 11th Mar 24
Gold and the Long-Term Inflation Cycle - 11th Mar 24
Fed’s Next Intertest Rate Move might not align with popular consensus - 11th Mar 24
Two Reasons The Fed Manipulates Interest Rates - 11th Mar 24
US Dollar Trend 2024 - 9th Mar 2024
The Bond Trade and Interest Rates - 9th Mar 2024
Investors Don’t Believe the Gold Rally, Still Prefer General Stocks - 9th Mar 2024
Paper Gold Vs. Real Gold: It's Important to Know the Difference - 9th Mar 2024
Stocks: What This "Record Extreme" Indicator May Be Signaling - 9th Mar 2024
My 3 Favorite Trade Setups - Elliott Wave Course - 9th Mar 2024
Bitcoin Crypto Bubble Mania! - 4th Mar 2024
US Interest Rates - When WIll the Fed Pivot - 1st Mar 2024
S&P Stock Market Real Earnings Yield - 29th Feb 2024
US Unemployment is a Fake Statistic - 29th Feb 2024
U.S. financial market’s “Weimar phase” impact to your fiat and digital assets - 29th Feb 2024
What a Breakdown in Silver Mining Stocks! What an Opportunity! - 29th Feb 2024
Why AI will Soon become SA - Synthetic Intelligence - The Machine Learning Megatrend - 29th Feb 2024
Keep Calm and Carry on Buying Quantum AI Tech Stocks - 19th Feb 24

Market Oracle FREE Newsletter

How to Protect your Wealth by Investing in AI Tech Stocks

Stock Market Margin Debt - Don't Let This Nonsense Number Fool You

Stock-Markets / Stock Markets 2015 Aug 05, 2015 - 03:31 PM GMT

By: DailyWealth

Stock-Markets

Dr. David Eifrig writes: Some people just want to see the worst in a stock market...

They like to take every fact or statistic they can find and twist it into an omen of doom.

We don't work that way. In my Retirement Trader newsletter, we look at the facts, talk about them, and draw simple conclusions about what's possible.


As longtime subscribers know, we've been bullish on America, the U.S. economy, and the market for five years running. And we've largely been right. We've talked about a slow grind higher and higher.

The current nail biting over "margin debt" is just the latest example of what I'm talking about...

Buying "on margin" means to buy with money borrowed from your broker. The following chart shows that the amount of money that stock investors have borrowed has recently climbed to almost $500 billion.

To a bear, that looks like the market is getting "frothy"... when people get so excited about stocks that they start borrowing more and more money to buy them. Pretty soon, that frothiness causes a crash.

And in the chart, you can see that margin debt and stock prices fell together during the bear markets of 2000 and 2007-2008.

Guess what? Margin debt is a nonsense number. And that chart contains all the information you need to realize it.

It's not investor euphoria or excessive risk-taking that's driving margin borrowing up... It's just the market.

After all, if investors borrow a consistent amount of their holdings to boost their returns, then that amount will rise as the value of their holdings rise.

And margin debt as a percentage of total market cap has remained consistent, floating around the 2% level.

It is a touch on the high side compared with the bearish bottom of 2002... but there have been no sharp moves or spikes to suggest a bubble in the making.

Make no mistake about it, debt does cause volatility. But the level of debt here just isn't that high or troublesome.

We remain confident in the markets as a whole. And we're still bullish on the stock market and content with the economy.

Here's to our health, wealth, and a great retirement,

Dr. David Eifrig

Editor's note: While the overall economy is gradually improving... the U.S. Social Security system seems to be getting worse. Right now, Americans are leaving billions of Social Security dollars on the table, simply because they're unaware of little-known "loopholes"...
 
You see, most Americans aren't aware that they may qualify, but it's possible for many people to dramatically increase the amount of money you get from Social Security in retirement. Fortunately, you can learn more about all of these in Doc's brand-new video presentation. You can view it for free right here.

http://www.dailywealth.com

The DailyWealth Investment Philosophy: In a nutshell, my investment philosophy is this: Buy things of extraordinary value at a time when nobody else wants them. Then sell when people are willing to pay any price. You see, at DailyWealth, we believe most investors take way too much risk. Our mission is to show you how to avoid risky investments, and how to avoid what the average investor is doing. I believe that you can make a lot of money – and do it safely – by simply doing the opposite of what is most popular.

Customer Service: 1-888-261-2693 – Copyright 2013 Stansberry & Associates Investment Research. All Rights Reserved. Protected by copyright laws of the United States and international treaties. This e-letter may only be used pursuant to the subscription agreement and any reproduction, copying, or redistribution (electronic or otherwise, including on the world wide web), in whole or in part, is strictly prohibited without the express written permission of Stansberry & Associates Investment Research, LLC. 1217 Saint Paul Street, Baltimore MD 21202

Disclaimer: The above is a matter of opinion provided for general information purposes only and is not intended as investment advice. Information and analysis above are derived from sources and utilising methods believed to be reliable, but we cannot accept responsibility for any losses you may incur as a result of this analysis. Individuals should consult with their personal financial advisors.

Daily Wealth Archive

© 2005-2022 http://www.MarketOracle.co.uk - The Market Oracle is a FREE Daily Financial Markets Analysis & Forecasting online publication.


Post Comment

Only logged in users are allowed to post comments. Register/ Log in