MARGIN DEBT: HISTORICAL BENCHMARKS SIGNAL POTENTIAL PROBLEMS
-- ABSTRACTED FROM: 04-04-17 Lance Roberts via RealInvestmentAdvice.com, "Margin Debt Hits Record, Nothing To Worry About?"
1- MARGIN DEBT AS A % OF THE ECONOMY
...The stock market should be somewhat reflective of underlying economic activity, then the correlation between the markets, leverage, and economic growth should provide some clues as to future outcomes. Unfortunately, it does.
2- MARGIN DEBT TO DISPOSABLE INCOME
3- MARGIN DEBT TO MARKET CAPITALIZATION
Spikes in the margin debt to market capitalization ratio have been historically consistent with short-term market peaks and the beginning of major corrections. Currently, the recent spike higher has led to some stagnation in the market and will be worth watching as we head into the seasonally weak summer months.
Here is the important point. It is not the rising level of debt that is the problem, it is the decline which marks peaks in both market and economic expansions.
