NYSE Margin Debt Rises To New All Time High As Net Worth Slides To Record Low

May 29, 2013 Leave a comment

NYSE Margin Debt Rises To New All Time High As Net Worth Slides To Record Low

Tyler Durden on 05/28/2013 18:28 -0400

Margin debt net free credit_0

With everything else in uncharted territory: central bank balance sheets, the stock market, global debt, it was only a matter of time before that old-school indicator of exuberance – margin debt – also joined the ranks of things that are “off the charts.” Never one to disappoint (except when Waddell and Reed dumps a “massive” 75,000 ES trade which promptly kills its liquidity replenishment points of course), the NYSE has reported that April margin debt, as expected, hit all time records, just in time for the S&P’s own all time high fireworks spectacular.  Rising from the just shy of summer of 2007 levels posted in March, or $380 billion, April margin debt not surprisingly rose to a record high of $384 billion. Additionally, even when netting out account credit metrics, such as Free Credit Cash and Credit Balances in margin accounts, total investor net worth just hit an all time record low of ($106) billion.

In short: investors have never been more levered.And that is only looking at legacy metrics. Recall that as per recent regulations requiring that hedge funds expose gross leverage via Form PF, just the top 50 or so HFs have gross exposure of over $1.3 trillion, which means they are levered massively more than their LP realize, and than the naive NYSE margin statistic indicates.

But that is a topic for a different day.

For now let’s just bask in the simplicity of the good old days, where NYSE margin was relevant, and not get too scared by what the true margin level in the market may actually be, especially when one takes into account the leverage on the Fed’s own balance sheet.

Filed under Macro Trends

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Kee Koon Boon (“KB”) is the co-founder and director of HERO Investment Management which provides specialized fund management and investment advisory services to the ARCHEA Asia HERO Innovators Fund (www.heroinnovator.com), the only Asian SMID-cap tech-focused fund in the industry. KB is an internationally featured investor rooted in the principles of value investing for over a decade as a fund manager and analyst in the Asian capital markets who started his career at a boutique hedge fund in Singapore where he was with the firm since 2002 and was also part of the core investment committee in significantly outperforming the index in the 10-year-plus-old flagship Asian fund. He was also the portfolio manager for Asia-Pacific equities at Korea’s largest mutual fund company. Prior to setting up the H.E.R.O. Innovators Fund, KB was the Chief Investment Officer & CEO of a Singapore Registered Fund Management Company (RFMC) where he is responsible for listed Asian equity investments. KB had taught accounting at the Singapore Management University (SMU) as a faculty member and also pioneered the 15-week course on Accounting Fraud in Asia as an official module at SMU. KB remains grateful and honored to be invited by Singapore’s financial regulator Monetary Authority of Singapore (MAS) to present to their top management team about implementing a world’s first fact-based forward-looking fraud detection framework to bring about benefits for the capital markets in Singapore and for the public and investment community. KB also served the community in sharing his insights in writing articles about value investing and corporate governance in the media that include Business Times, Straits Times, Jakarta Post, Manual of Ideas, Investopedia, TedXWallStreet. He had also presented in top investment, banking and finance conferences in America, Italy, Sydney, Cape Town, HK, China. He has trained CEOs, entrepreneurs, CFOs, management executives in business strategy & business model innovation in Singapore, HK and China.

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