{"id":31666,"date":"2018-02-27T08:03:43","date_gmt":"2018-02-27T13:03:43","guid":{"rendered":"http:\/\/olduvai.ca\/?p=31666"},"modified":"2018-02-27T08:03:43","modified_gmt":"2018-02-27T13:03:43","slug":"stock-market-leverage-spikes-sparks-already-flew-brokerage-regulator-concerned-but-hey-nothings-going-to-happen","status":"publish","type":"post","link":"https:\/\/olduvai.ca\/?p=31666","title":{"rendered":"Stock Market Leverage Spikes. Sparks Already Flew. Brokerage Regulator \u201cConcerned.\u201d But Hey, Nothing\u2019s Going to Happen."},"content":{"rendered":"<header>\n<h3 class=\"entry-title\"><a href=\"https:\/\/wolfstreet.com\/2018\/02\/26\/stock-market-rests-happily-on-smoldering-powder-keg\/\">Stock Market Leverage Spikes. Sparks Already Flew. Brokerage Regulator \u201cConcerned.\u201d But Hey, Nothing\u2019s Going to Happen.<\/a><\/h3>\n<\/header>\n<div class=\"entry-content\">\n<p><strong>Resting Happily on Smoldering Powder Keg.<\/strong><\/p>\n<p>There is nothing like a big shot of leverage to fire up the stock market. And that\u2019s what the market got in 2017, when the S&amp;P 500 surged 26%, and in January 2018, when the index soared another 7.5% through January 26 \u2013 until suddenly something happened.<\/p>\n<p>One measure of leverage in the stock market is margin debt \u2013 the amount individual and institutional investors borrow from their brokers against their portfolios \u2013 which surged $22.9 billion in January to a new record of $665.7 billion, according to <a href=\"http:\/\/www.finra.org\/investors\/margin-statistics\" target=\"_blank\" rel=\"noopener\">FINRA<\/a> (Financial Industry Regulatory Authority), which regulates member brokerage firms and exchange markets, and which has taken over margin-debt reporting from the NYSE.<\/p>\n<p>For the 12-month period through January, margin debt soared $112.2 billion, among the largest 12-month gains in the history of the data series, behind only the 12-month periods ending in:<\/p>\n<ul>\n<li>December 2013 ($123 billion)<\/li>\n<li>July 2007 ($160 billion)<\/li>\n<li>March 2000 ($133.7 billion)<\/li>\n<li>November 1997 ($132 billion).<\/li>\n<\/ul>\n<p>But it\u2019s not just the recent surge; it\u2019s the length of the surge. With only a few noticeable down periods, margin debt has soared for nine years in a row and now exceeds the prior peak of July 2007 ($416 billion) by 60%.<\/p>\n<p>By comparison, over the same period, nominal GDP (not adjusted for inflation) has grown 32%, and the Consumer Price Index has grown 20%. In other words, margin debt has ballooned twice as fast from peak to peak as GDP and three times as fast as the Consumer Price Index.<\/p>\n<p>The chart below shows margin debt based on the FINRA data, which includes margin debt from its own member firms and from NYSE Member firms, and is therefore more complete and larger than the NYSE data was. For example, NYSE margin debt in November 2017, the last month available, was $580.9 billion while FINRA\u2019s data for November showed margin debt of $627.4 billion.<\/p>\n<p>&#8230;click on the above link to read the rest of the article&#8230;<\/p>\n<\/div>\n","protected":false},"excerpt":{"rendered":"<p>Stock Market Leverage Spikes. Sparks Already Flew. Brokerage Regulator \u201cConcerned.\u201d But Hey, Nothing\u2019s Going to Happen. Resting Happily on Smoldering Powder Keg. There is nothing like a big shot of leverage to fire up the stock market. And that\u2019s what the market got in 2017, when the S&amp;P 500 surged 26%, and in January 2018, [&hellip;]<\/p>\n","protected":false},"author":1,"featured_media":0,"comment_status":"closed","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"_monsterinsights_skip_tracking":false,"_monsterinsights_sitenote_active":false,"_monsterinsights_sitenote_note":"","_monsterinsights_sitenote_category":0,"footnotes":""},"categories":[2],"tags":[273,1138,3600,4254,4255],"class_list":["post-31666","post","type-post","status-publish","format-standard","hentry","category-economics","tag-equities","tag-stock-market","tag-stock-market-leverage","tag-wolf-richter","tag-wolfstreet"],"_links":{"self":[{"href":"https:\/\/olduvai.ca\/index.php?rest_route=\/wp\/v2\/posts\/31666","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/olduvai.ca\/index.php?rest_route=\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/olduvai.ca\/index.php?rest_route=\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/olduvai.ca\/index.php?rest_route=\/wp\/v2\/users\/1"}],"replies":[{"embeddable":true,"href":"https:\/\/olduvai.ca\/index.php?rest_route=%2Fwp%2Fv2%2Fcomments&post=31666"}],"version-history":[{"count":1,"href":"https:\/\/olduvai.ca\/index.php?rest_route=\/wp\/v2\/posts\/31666\/revisions"}],"predecessor-version":[{"id":31667,"href":"https:\/\/olduvai.ca\/index.php?rest_route=\/wp\/v2\/posts\/31666\/revisions\/31667"}],"wp:attachment":[{"href":"https:\/\/olduvai.ca\/index.php?rest_route=%2Fwp%2Fv2%2Fmedia&parent=31666"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/olduvai.ca\/index.php?rest_route=%2Fwp%2Fv2%2Fcategories&post=31666"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/olduvai.ca\/index.php?rest_route=%2Fwp%2Fv2%2Ftags&post=31666"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}