Margin debt, incredibly, is up 100 times in the last 39 years (see the chart above). It was $4 billion back in 1974; it's nearly $400 billion today. That is a big reason why stock prices are in the stratosphere. You might think that there's a lot more money around, thereby justifying the rise. ... Let's normalize this indicator to GDP and see what we have. ... [M]argin debt as a percentage of annual GDP is still 10 times the 1974 level. ... The current ratio is also 3 times what it was at previous major tops in the stock market in the 20th century.
A Big Reason Why 2013 Stock Prices are in the Stratosphere
A famous quote attributed to Archimedes, the ancient Greek mathematician, is: "Give me a place to stand and with a lever I will move the whole world." And, as you probably know, leverage can also move the stock market.
In the July-August Elliott Wave Theorist, Robert Prechter discussed the role of leverage in sending the market to new price highs.
The high levels of margin debt in the stock market should be a concern to every investor, as should other indicators that Elliott Wave International reviews.
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