NYSE Margin Data

NYSE Margin Debt, 2000

Source: NYSE

November's NYSE margin debt level came in at $219 billion, lower than October's $233 billion. Margin debt, which has now dropped for the second-straight month, is at its lowest level since November 1999, when NYSE margin came in at $206 billion.

But the drop in margin is not yet sufficient to signal a bottom for stocks, according to Charles Biderman, president of TrimTabs.com, a firm that tracks stock market liquidity. Biderman says margin debt "has to fall another $35-$40 billion" to send that message. At that point margin levels would be back to where they were at the end of October 1999, as the market started soaring.

Overall, margin remains high historically. November's reading of $219 billion dwarfs the $139 billion it registered in November 1998.

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Why This Metric Matters Buying on margin means borrowing money against your account to buy stocks. You might, for example, have $10,000 in cash but buy $15,000 worth of stock, using $5,000 of borrowed money from your broker. When stock prices are soaring, investors who borrowed against their accounts look like geniuses. But when the market begins to head south, investors who borrowed money to finance stock purchases may be subject to margin calls: Brokers demand that investors add money to their accounts so the collateral is sufficient to cover the erosion in portfolio value. If the investor doesn't have the cash, the broker will sell the stock, usually at falling prices. Those sales can accelerate the market's decline. As margin debt climbs -- especially to historically high levels -- it often serves as a warning sign that speculation is growing rampant in the market. Indeed, in March as margin debt reached an all-time high, it was flashing a warning sign that the market was overvalued. The Nasdaq , which reached an all-time high of 5132 on March 10, 2000, subsequently fell 50%. The S&P 500 has fallen as well since then, though not quite so dramatically.

How Often Updated on TSC Monthly, about the 15th of each month

Historical Info Margin debt on the NYSE reached an all-time high of $278 billion in March 2000.

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