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Margin Debt, part II

Posted By Barry Ritholtz On January 18, 2007 @ 11:44 am In Investing,Markets,Psychology | Comments Disabled

We mentioned earlier [1] the recent rise in Margin. Have a look at the following chart:

NYSE Member Firm Margin Levels

Nyse_margin [2]
Sources: Bloomberg, RR&A

The raw numbers are not what actually matter — and adjusting for inflation isn’t significant.

The reason Margin matters is that it is potentially revealing of extreme sentiment and/or speculation (margin clerks can do major damage in a downturn).

There are a few ratios I would like to identify and convert to oscialltors relative to Margin:

Total Margin / Total Market Cap

NYSE Margin / Account Assets

Margin / Trading Volume

Total Margin / Market Volatility

The idea would be to test these versus historical tops and bottoms . . .


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

URL to article: http://www.ritholtz.com/blog/2007/01/margin-debt-part-ii/

URLs in this post:

[1] earlier: http://bigpicture.typepad.com/comments/2007/01/margin_debt_up_.html

[2] Image: http://bigpicture.typepad.com/.shared/image.html?/photos/uncategorized/nyse_margin.png

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