NYSE Margin Debt At An All-Time Record High Heralds An Impending Stocks Crash

By Doug Short – Re-Blogged From http://www.Silvr-Phoenix500.com

The astonishing surge in leverage (i.e. NYSE Margin Debt) in late 1999 peaked in March 2000, the same month that the S&P500 hit its all-time daily high, although the highest monthly close for that year was five months later in August. A similar surge NYSE Margin Debt began in 2006, peaking in July 2007, three months before the market peak…and subsequent crash.

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Warren Buffett Predicting Upcoming Stock Market Crash

When it comes to investing in the stock market, we’re told to follow the smart money. Who might that be? The most influential investors/businessmen in America today are Warren Buffett, John Paulson, and George Soros. Their investing acumen has helped them amass billions of dollars and millions of followers.

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Margin Debt and Stock Prices

cropped-bob-shapiro.jpg   By Bob Shapiro

Many investors who buy stocks try to increase their total returns by borrowing money for part of the purchase price. When this borrowing is from a stock brokerage and secured by all the stock in the transaction, this money is referred to as Margin Debt. If the price of the stock goes their way, they make a profit not only on the money they put up but also on the money they borrowed.

Of course, if the price goes against them, their loss is increased – but not by just as much. The stock bought on Margin will make or lose money depending on the price movement, but regardless, they have to pay interest on the loan. Investing on Margin is not for the faint of heart. Still, there is a lot of stock bought on Margin.

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