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Margin debt reaching all-time highs can be
viewed as a sign of excessive confidence in the markets, yet knowing
this hasn’t been really that helpful when it comes to portfolio
construction.
What
has happened in the past that has been helpful when it comes to
margin debt is this…when Margin Debt was hitting all-time highs
and turned
lower (which
in did back in 2000 & 2007), the S&P 500 was near a peak in
prices.
Doug
Short updates
us in the chart above, reflecting that Margin debt now for the second
month in a row has decreased from the highest levels in all of
history at (1). Does this mean that “the top” is in for the S&P
500? Not in my opinion. Does it send a word of caution towards very
large portfolio exposure to the stock market? The Patterns would
suggest it does.
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