Margin Debt, Cash and Bull Market Peaks
Debt is high, but so is cash, leaving a neutral long-term picture.
The Wall Street Journal recently ran a story on the high levels of margin debt at firms tracked by the New York Stock Exchange.
With a big month-to-month jump, debt rose to $270 billion, which is a level eclipsed only by March 2000 - the height of bubble-mania in U.S. equities.
Scary stuff, but unfortunately the Journal didn't drill down one more layer, which changes the picture considerably.
The NYSE doesn't just track the liabilities sitting in brokerage accounts (margin debt), but that's all that ever gets reported. Unbeknownst to most, the NYSE also tracks assets called free credits. This is money available for customers to withdraw, which is accumulated when customers deposit funds or sell stocks.
The chart below shows the comparison in these figures between now and the bubble years.
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