"Among the litany of other classic features of a speculative bull market peak, margin debt on the NYSE has surged to the highest level in history, and at nearly 2.5% of GDP, exceeds all but two months in 2000 and 2007. The amount being borrowed to buy stocks on margin is now 26% the size of all commercial and industrial loans in the entire U.S. banking sector."That last part is astounding, and I had to check to make sure that it is true (with the NYSE and the Fed). Since I had already pulled the data, I figured why not see how this ratio - which is a novel contribution by Hussman - has varied over time.
The ratio spent much of the second half of the 20th century below five percent. It wasn't until the Fed induced bubble in the mid 90s that it went parabolic, cracking 15% for the first time ever in September 1997.
Here are all the months when the ratio has been above 25 percent: February and March 2000; April through August 2007; February through May 2011; September and October 2013.
Keep in mind that we are essentially deflating the series using commercial and industrial loans, which grow swiftly themselves during credit bubbles.
Every cockpit indicator is screaming that the plane is about to crash into terrain, but the response of almost all other investors is to push the throttles forward.