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More on Margin

Posted By Barry Ritholtz On September 18, 2003 @ 3:30 pm In Finance,Media | Comments Disabled

Jeff Opdyke has a WSJ article on Margin this am: Deja Vu: Buying Stock on Margin Is Back in Vogue [1]. His reporting specifically notes a big increases in online broker’s margin:

Wednesday, online firm E*Trade Group Inc. reported that margin debt had increased to $1.23 billion, an increase of about 25% this year. Jarrett Lilien, president and chief operating officer at E*Trade, says the margin growth his firm has seen “is growing orderly and responsibly.”

Online competitor Ameritrade Holding Corp. saw margin activity increase 46% to $1.9 billion between March and June. Brown/Co, a unit of J.P. Morgan Chase & Co., says its margin balance has risen about 20% so far this year in accounts that have a margin balance.

The article quotes yesterday’s research piece, and more importantly, repeats my complaint how incomplete the present margin data is:

The increase in margin debt “suggests that smaller investors have become extremely speculative again,” says Barry Ritholtz, market strategist at Maxim Group, a medium-size brokerage firm in New York. “If I had to bet, I’d say a disproportionate amount of [buying on margin] is in tech, biotech and Internet stocks, just like last time.”

Brokerage firms and regulatory agencies don’t detail what stocks investors are buying on margin. But Ken Clipper, chief executive officer of Brown/Co, says anecdotal evidence shows that the Nasdaq 100 Index Tracking Stock, also known as the Triple Qs for its QQQ symbol, “is our No. 1 product.” Mr. Clipper says it wouldn’t be a stretch to think that “savvy customers are playing the Q’s” on margin.

If you read yesterday’s margin comments (NASD Firm Margin Levels Spikes to Record Levels [2]), you’ll note I reach a somewhat different conclusion than the other people quoted in the article [1]. Because the total amount of margin — NYSE and NASD firms combined — has not really moved up much, and is still way below the bubble peak — I doubt this signls an impending top or major reversal.


Article printed from The Big Picture: http://www.ritholtz.com/blog

URL to article: http://www.ritholtz.com/blog/2003/09/more-on-margin/

URLs in this post:

[1] Deja Vu: Buying Stock on Margin Is Back in Vogue: http://online.wsj.com/article/0,,SB106384750149973900,00.html

[2] NASD Firm Margin Levels Spikes to Record Levels: http://bigpicture.typepad.com/comments/2003/09/nasd_firm_margi.html

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