Worrying signs of a build-up of froth in US stocks

Investors are piling into US stocks with borrowed money. Rather than buy stocks outright with their own cash, bullish investors sometimes pledge securities to get loans from brokers, and buy more securities with the money.

This ‘margin debt’ reached a record monthly total of $451.3bn in January. It has risen by a fifth over the past year and now exceeds 2007’s peak of $381bn. In 2009, it slid to a low of $173bn.

Many fear that this foreshadows a sharp market slide. Margin debt reached historic peaks in 2000 and 2007, and everyone remembers what happened next. The trouble [...]

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