NYSE Margin Debt, 2000
Source: New York Stock Exchange
Margin debt on the
New York Stock Exchange
fell for the third straight month, according to figures released on Wednesday by the
. Margin debt for December came in at $198.7 billion, down more than $20 billion from November, when it was $219 billion. The December figure marks the first time margin debt has dropped below $200 billion since October 1999.
Charles Biderman, president of
, who last month
said he needed to see a further drop in margin debt before he could feel more comfortable with the market, says that December's drop is exactly what he needed to see. At the end of December, the market cap for the NYSE,
-- excluding ADRs -- was a combined $16.3 trillion. At the end of November the market cap was $15.97 trillion. That increase in market cap from the month before, coupled with a decrease in margin debt, is an important marker for Biderman. "That happens at a market bottom," he says.
Further, Biderman now says that margin debt represents 1.21% of the overall market cap of the three stock exchanges. And while margin debt as a percentage of market cap is still higher than it was in December 1998 (when it was 1%), it is much lower than the 1.5% level it reached in March 2000, at the market's peak. What's more, margin debt as a percentage of market cap is now at its lowest level since October 1999.
Finally, Biderman believes margin debt has come down even more since the end of the year. A tough early January in the market, he believes, has brought margin levels to more reasonable levels. All of this -- along with other indicators that Biderman watches -- has him feeling very good about the market.
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