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Author: waterfell Big gold star, 5000 posts Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: of 457182  
Subject: Re: Margin Date: 9/17/2003 2:14 PM
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http://www.nasd.com/Investor/Trading/Margin/margin_stat.asp

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Taking a look at this a second time, I see some evidence that margin debt is not really as excessive as it first appeared. Margin Debt for NASD stocks is indeed higher now than at the market peak in 2000. However, the other column on the link shows that Free Credit Balance (the cash that customers can immediately withdraw from their accounts) is also higher than in 2000.

March '00 Debit = $21,403 Credit = $17,452
July '03 Debit = $25,977 Credit = $32,593

So back in 2000, there was more margin debt than cash credit. As of July '03, the relationship is reversed. There is still less margin than cash. I took the time to copy the numbers into a spreadsheet. Interesting stuff, but I am not sure it shows a correction is right around the corner.

Also, something doesn't seem to add up here. The Free Credit Balance amount for May '03 was 19,136. The Free Credit Balance for June '03 was 27,756. Did the market really go up 45% in one month? Is that when everyone took their money out of fixed income instruments and sent it to their stock broker? That period also accounts for the dramatic increase in margin debt. To repeat, something doesn't add up here. Thoughts?
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