Margin Debt and the ''Highway to the Danger Zone''

May 24th, 2013

by Chris Kimble

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Sir John Templeton first alerted me to the dangers of excess margin debt in the late 1990's, and I've been a fan of keeping in touch with this key indicator ever since.

Fresh Margin debt numbers have just been released. My good friend Doug Short shared the chart below, reflecting that margin debt continues to move higher, reaching levels where the S&P 500 has struggled to move much higher!

Are we on the "Highway to the Danger Zone" due to these historically high debt levels? Will it be different this time? Was a Danger Zone level in the past, let's see if it's any different this time around!

Negative net worth has only been this low one other time in history! First time it didn't end real well!

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