Saturday, January 3, 2009

Margin Debt Down - ETrade's Doing?

Margin debt in retail investors' accounts has declined 37% from 2007 through the end of November, 2008.

The WSJ is attributing it to an intentional move by investors, to reduce margin obligations in light of the recession.

I am not so sure. A significant part of that decline must have been caused by the overly aggressive margin liquidations by ETrade, Ameritrade and some of the other online brokers, which wiped out a significant amount of investor assets.

Still, debit balances in margin accounts for customers of NYSE-member securities firms fell to $201.48 billion in November, the most recent data available, from $322.78 billion at the end of 2007.

How much does the Madoff Mess add to that decline?

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