March 28, 2022
Trades & Tutorials
By Geoff Bysshe
In May of 2021 I outlined a dangerous condition of excessive margin debt that looked remarkably similar to only two other periods in the last 3 decades – 2000 and 2007.
You may recall that both of those periods didn’t end well for the bulls.
At the time of the post, however, the rate of margin debt growth was at record levels and still growing, and as I noted at the time…
While margin debt grows it fuels a bull market. Therefore, the prior post focused on how to identify when the margin debt bubble should be considered “popped”, and as a result - dangerous.
According to the research in that post, the bubble has recently popped.
If the patterns of 2000 and 2007 are any guide, there will be a predictable period of time during which margin debt deleveraging will weigh on stocks.
The video below is a quick recap of why we should consider the bubble “popped”, and it explains an indicator that determines when you can count on margin debt trends being significantly bullish or bearish.
For the most comprehensive understanding of the entire margin debt bubble situation, review the initial post here before watching the video below.