Buying Stocks with Debt Leads to Market Vulnerability

Analysts warn that the increase in margin loans—borrowing to buy stocks—exacerbated the selloff that occurred at the end of last month and that, if such debt levels continue to rise, it could lead to more market volatility. This according to an article in The Wall Street Journal. The article cites FINRA data showing that retail and institutional investors have borrowed a “record $642.8 billion against their portfolios” in an effort to participate in stock market… Read More

Margin Debt as Indicator: Bearish Signals Writes Hulbert

In his MarketWatch column, Mark Hulbert highlights the use of margin debt as a market indicator. Margin debt is the total amount investors borrow to purchase stocks. As Hulbert notes, research by Norman Fosback, former president of the Institute for Econometric Research, concludes that “a good long-term indicator can be created by comparing total margin debt with its 12-month moving average.” If the current level is above the 12-month moving average, it is considered a… Read More