Margin Debt

Last year in May Cramer mentioned that Margin Debt was at a record high and he speculated that was why the market dropped sharply in June 2006. I finally found a source that gives month-by-month margin debt for the NYSE. Back in May 2006 it was (let me see if I can get the zeros right): $230,540,000,000.

Now if you buy on margin and the market drops sharply, you can get a margin call as there are limits of the ratio of margin to your portfolio worth. A margin call can force you to sell stocks while the market is declining (generally not a good thing). So excessive use of margin can exacerbate a stock market correction. I do not use margin.

So what do you think the total margin debt was in July 2007? I wondered myself. Here is the chart for 2007 (I think it pretty much speaks for itself):

End of month	Margin debt	Free credit cash accounts	Credit balances in margin accounts
January	$285,610	$90,340	$156,190
February	$295,870	$96,550	$155,140
March	$293,160	$99,690	$161,890
April	$317,990	$104,360	$162,570
May	$353,030	$109,030	$176,200
June	$378,240	$119,300	$179,920
July	$381,370	$122,740	$205,830