Four Hidden Risks of Margin Debt

I was stunned to hear about the latest figures on the amount of margin debt carried by U.S. investors. For New York Stock Exchange shares alone, the figure hit a record $285.6 billion in January.

To put that in perspective, the previous peak, occurring at the March 2000 market top, was $278.5 billion.

Even more sobering is thinking that that's almost $1,000 in debt for every man, woman and child in the U.S. We're used to hearing figures like that for the national debt, not margin debt. (Don't worry, the national debt is still larger -- roughly some $27,000 per U.S. citizen.)

What's going on? More investors are leveraging with borrowed funds to chase stock-market returns. They're taking on more risk. It scares me in the big picture because we're all exposed to greater turbulence if the market goes into reverse. ...