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Stock Market Leverage is at Dangerous Levels

Stock Market Leverage is at Dangerous Levels.  As the chart below from Advisor Perspective’s Jill MIslinski shows investor negative credit balances in margin accounts these days dwarf the negative balances that preceded  big market declines of  the last ten years.  Why should we worry about that?  Stock drops precipitate margin calls from brokers.  These drops often force investors to sell their stock. Today’s enormous amount of margin debt, therefore, could  greatly exacerbate a future downturn. Investors are forced to sell to meet margin calls.

Stock Market Leverage is at Dangerous Levels
Stock Market Leverage is at Dangerous Levels




















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Brad Lamensdorf

Brad Lamensdorf, the founder and portfolio manager of Active Alts, is a principal and co-manager of the AdvisorShares Ranger Equity Bear ETF. He previously managed a long-short investment partnership from 1998-2005 under the name Tarpon Capital Management. Earlier in his career Mr. Lamensdorf was an equity trader/market strategist for the Bass Brothers’ trading arm. He managed a short only portfolio in addition to co-managing a $1bil hedging program. He also served as in-house market strategist for the entire internal and external network of Bass Brothers money managers.

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