• 18 hours What’s Next In The Trump vs. Twitter Drama?
  • 2 days Escalating Tensions Could Crush $52 Billion China-U.S. Energy Deal
  • 3 days The Fed Is Printing Money At Unprecedented Levels
  • 3 days How Is The Real Estate Market Handling COVID-19?
  • 3 days Gold Flat As Markets Await Fed Chair Speech
  • 3 days What Is Day Trading And Is It Right For You?
  • 3 days Energy CEOs See Big Payouts Despite Oil Price Crash
  • 3 days Saudi Arabia Is Fighting A War On Two Fronts
  • 3 days 40 Million Jobless As Pandemic Fuels Economic Collapse
  • 3 days What Do India's Latest Reforms Mean For Its Coal Industry?
  • 3 days Copper Glut Continues To Grow
  • 4 days How A Pandemic Made Americans Better Workers
  • 4 days The Trillion Dollar Space Race Crosses Another Milestone
  • 4 days Gold Prices Fall As Stock Market Sentiment Turns Positive
  • 4 days Conspiracy Theories Set Tone For 5G Cold War
  • 5 days Working From Home Will Transform The Energy Industry
  • 5 days The Multi-Billion Dollar Race For A Vaccine
  • 5 days Can Domestic Tourism Bolster Emerging Economies?
  • 5 days Australia Considers $100 Million Investment To Kickstart Mining Industry
  • 5 days Has Re-Opening The Economy Been Successful?
How The Ultra-Wealthy Are Using Art To Dodge Taxes

How The Ultra-Wealthy Are Using Art To Dodge Taxes

More freeports open around the…

What's Behind The Global EV Sales Slowdown?

What's Behind The Global EV Sales Slowdown?

An economic slowdown in many…

John Rubino

John Rubino

John Rubino edits DollarCollapse.com and has authored or co-authored five books, including The Money Bubble: What To Do Before It Pops, Clean Money: Picking Winners…

Contact Author

  1. Home
  2. Markets
  3. Other

Why Investors Should Be Terrified, In One Chart

Advisor Perspectives' Doug Short recently published an update on margin debt, accompanied by several well-made charts. But it only takes one to make the point.

See below for the relationship between margin debt -- money borrowed by retail investors against their stocks and used to buy more stock -- where Short has enhanced the visual impact by inverting the margin debt line. As presented here, a downward sloping red line means margin debt is increasing. So when the two lines diverge, that means stock prices and margin debt are both rising.

The gap between them is thus a measure of the divergence between investor expectations and market reality. Note two things: 1) When the gap grows too large, the lines tend to converge via falling stock prices and shrinking margin debt (usually through involuntary liquidation of leveraged stock portfolios). And 2) Today the gap is wider than it's ever been. If history is a valid guide, the two lines will shortly cross somewhere around 1,000 on the S&P, or about 50% lower than current levels.

NYSE Margin Debt versus S&P500 1995-2015 Chart

 

Back to homepage

Leave a comment

Leave a comment