Visiting the history books
In a 2001 landmark study, senior economist of the Federal Reserve Bank of Boston, Peter Fortune, wrote that many of the market's most painful periods were connected to excessive margin debt. He also notes that it played a key role in the market crash of 1929 and again in the steep market correction of 1987.

How much is too much?
Just because margin debt balances have steadily risen throughout 2012, it doesn't necessarily mean they've hit scary levels. Is $165 billion in margin debt a lot of money compared with past periods of excess? Well, consider that this figure never exceeded $120 billion until May 2006. Also note that it shot past $250 billion near the end of 2007, which was surely a factor when investors were subsequently pushed into selling throughout 2008 and 2009.

Investors were so spooked by the effect of margin calls from brokers in the summer and fall of 2008, that they moved margin balances lower -- at least for awhile. The total level of margin debt fell from $182 billion at the end of 2008 to $133 billion by the end of 2009. This figure crept up to $148 billion at the end of 2010, and as noted, now stands at $165 billion.