The Investment Thread

Saintaholic said
There is a massive bubble about to get popped. Way too much margin lending has occurred in the past year, due to short-sighted relaxing of SLR policies that have just gone offline. Too much of it was used.

It would be like giving someone $10 million to go gamble at the casino, and they absolutely MUST pay back all $10 million. But instead of being conservative and only gambling with say, $500k to $1m, you gamble with $9 million of it all at once, and lost on too many bets, so now you're in deep trouble.

It’s interesting but the chart isn’t necessarily demonstrative. Margin is a function of total asset value, so a raw number in billions isn’t as meaningful as margin/total. Lay the S&P over that chart and you can get a sense of whether they’re in sync. But it does look like the margin chart takes a higher trajectory at the end on the right (current) so the premise could still be true.