Elliott Wave InternationalmyEWISocioniomics.Net
Home > Stocks

NYSE Margin Debt at All-Time High
Why the stock market is like the 2006 housing bubble

By Bob Stokes
Fri, 29 Nov 2013 12:30:00 ET
Add to Facebook Add to Twitter Email to a friend Printer Friendly

Investors using ten to thirty times leverage have pushed stocks to new highs. Thanks to the Fed's easy money, banks are loaning wealthy speculators boatloads of money, and in turn, they are buying stocks. 

In March 2013, New York Stock Exchange margin debt was near an all-time record. Now, margin debt is at a record high.
Hedge funds aren’t the only entities using leverage in record amounts. Individuals are using it, too. [The chart above] shows that margin debt at brokerage firms has now reached an all-time high. Leveraged buying by institutions and margin buying by individuals explains how the averages ... got to where they are. It’s just another big debt-financed bubble, like the one in housing that ended in 2006.
-- The Elliott Wave Theorist, November 2013
Credit expansion fueled real estate mania to unsustainable levels until the bubble burst.
Is the Fed helping to create yet another asset bubble?
Federal Reserve Chairman Ben S. Bernanke and his central-bank counterparts ... have bet the run-up in stock and home prices they’ve engineered would boost consumer and corporate confidence and spur faster growth and higher inflation. Now they’re having to maintain or intensify their aid -- running the risk those efforts do more harm than good by boosting equity and property prices to unsustainable levels.
-- Bloomberg, Nov. 13
Even before NYSE margin debt reached a historic high, a major bank observed:
“Investors have rarely been more levered than today,” said Deutsche Bank, warning that the spike in margin debt is a “red flag” and should be watched closely. ... It said the equity rally may have further legs but it cited “astonishing similarities” between the latest patterns and events preceding prior market crises.
-- The Telegraph, Aug.13
The Elliott Wave Theorist helps you to assess the risk in today's financial markets.

Apply the Power of the Wave Principle. Benefit from Tomorrow's News Today. Invest Independently from the Herd.

Published continuously since 1979, Robert Prechter's Elliott Wave Theorist is more than the most-trusted, longest-lasting Elliott wave letter on the planet. It's guaranteed to be the most thought-provoking, well-researched and insightful 10 pages of commentary you read each month.

Prechter's Theorist is the resource that will help you anticipate important trend changes in finance, macroeconomics, business, politics, entertainment, demographics and beyond – insights that can help you identify lucrative investment opportunities and avoid dangerous market risks.

Special Offer plus FREE Bonus Resources: Start your 30-day risk-free trial today to get instant access to the three latest Theorists, Robert Prechter's two best-selling books delivered to your doorstep, and a wealth of subscriber-only bonus resources to help you increase your success with Elliott waves.

Editor: Robert Prechter
Published since: 1979
Frequency: Monthly
Pages/Format: 10/PDF
Markets: U.S. focus
Scope: Medium to long term
Subscription: $20/month



FFSEWI's Financial Forecast Service equips you to think, trade and invest independently from the crowd. Here's what you'll get, risk-free:
  • Short Term Update -- Intensive forecasts and analysis 3x/week for U.S. stocks, gold, silver, bonds and the U.S. dollar.
  • Financial Forecast -- In-depth, intermediate-term perspective on U.S. stocks, gold, silver, bonds and the U.S. dollar.
  • Theorist -- Bob Prechter's monthly big-picture insights.
Get complete details and start your risk-free trial today >>
Free Video Course
Learn the Why, What and How of Elliott Wave Analysis

Financial media use news and economic events to explain market moves. Steer clear of this misguided approach. Take part in the Elliott Wave Crash Course to learn what really moves the markets.

© 2016 Elliott Wave International
TRUSTe online privacy certification

The Elliott Wave Principle is a detailed description of how financial markets behave. The description reveals that mass psychology swings from pessimism to optimism and back in a natural sequence, creating specific Elliott wave patterns in price movements. Each pattern has implications regarding the position of the market within its overall progression, past, present and future. The purpose of Elliott Wave International’s market-oriented publications is to outline the progress of markets in terms of the Wave Principle and to educate interested parties in the successful application of the Wave Principle. While a course of conduct regarding investments can be formulated from such application of the Wave Principle, at no time will Elliott Wave International make specific recommendations for any specific person, and at no time may a reader, caller or viewer be justified in inferring that any such advice is intended. Investing carries risk of losses, and trading futures or options is especially risky because these instruments are highly leveraged, and traders can lose more than their initial margin funds. Information provided by Elliott Wave International is expressed in good faith, but it is not guaranteed. The market service that never makes mistakes does not exist. Long-term success trading or investing in the markets demands recognition of the fact that error and uncertainty are part of any effort to assess future probabilities. Please ask your broker or your advisor to explain all risks to you before making any trading and investing decisions.