What do you make of the margin debt?

Discussion in 'Trading' started by Port1385, Mar 7, 2009.

  1. http://www.nyxdata.com/nysedata/asp/factbook/viewer_edition.asp?mode=tables&key=50&category=8

    Margin debt for January just released and its at about 177. I'll give some approximations in regards to price and debt.

    January 2009 Debt=177 NYSE comp= 5100-5700

    July 2004 Debt=177 NYSE comp= 6300-6500

    May 2001 Debt=174 NYSE comp= 6700-6900

    May 1999 Debt=177 NYSE comp= 6500-6700

    Notice how in 1999, 2001 and 2004 debt was at comparable levels in regards to price. In the current times, price is lower with similiar debt. This tells me that more margin is required to prop the markets up and there is less real cash out there then before. These times are definately different then the past.

    Using a simple proportion, I came up with the following:

    (assumption is that margin debt will revisit previous lows and go no lower)

    (5476(average of all closes on the NYSE in January)*130(margin debt of Aug/Sept 2002))/177= $4021

    If this proportion works out correctly, then at a debt of 130 the price of the NYSE comp will be $4021.

    ($4021/$4284)X683.38=641.42=the bottom (assuming that the S&P500 trade comparingly to the NYSE comp)

    This is assuming that the margin debt will go no lower then the old lows...
  2. Since it's Port, I would normally throw it in chit chat right away. But I'm trying to understand what his conclusion is with the "data" before throwing a potentially decent thread into the trash can.

    What conclusion are you attempting to draw, Port? That margin was responsible for the rise of the stock market, and that today's deleveraging is just the act of returning the market back to where it should have been all along?
  3. I smell a rat Ivan, he's up to something. His data is probably fictional while he's trying to pull a pump and dump on a penny stock that might benefit from this being in the trading section. I'd hit the delete just to be be safe.:D