Retail Investors Are All In, Margin Debt At Record High

By Investment Research Dynamics

According to TD Ameritrade’s CEO, based on looking at 6.5 million customer accounts the retail investor segment of the stock market is “all in” (link from CNBC).  In terms of statistical analysis, it is highly probable – 99% certain – that this same analysis would apply to retail brokerage accounts at Fidelity, Schwab, Scotrade, etc.  Historically, this has been the fatal signal of an impending stock market crash, especially when coupled with the fact that margin debt on the NYSE is at an all-time record high (source:, edits are mine):


I’ll let the readers/investors/traders decide for themselves how this is going to play out. But for me it’s only a question of “when?” not “if?” In fact, the above analysis is amplified when you include this fact:

SPX Cash

That graph shows net cash flows out of the stock market. It is highly likely that this net outflow is being driven by smart money which is passing the “crash bag” to retail investors.

Needless to say it would appear that risk/return profile of holding stocks right now highly skewed in favor of an all-out  “SELL” signal.

On another note, a couple months ago I wrote about the fact that the State of Kansas was selling muni bonds at 4% in order to take the cash raised and inject it into its badly underfunded State pension fund and pray for returns in excess of 4% on that money: LINK.  I believe the current official assumed ROR for all pension funds is 7.5%.

I found out over the weekend that the State of Colorado is doing the same thing with its Public Employee Pension Fund (PERA).  I was chatting with someone who is covered by PERA, someone who understands that public pension funds are desperately underfunded, and she’s terrified that she will never see her retirement money.  She understood exactly what was going with muni bond scheme and that’s it’s nothing but a glorified Ponzi scheme.

This is going on all over the country.  As my link above outlines, several States with larger pension systems than Colorado and Kansas have already implemented these muni-bond Ponzi schemes.   With interest rates on all debt securities not rated for default or near-default now close to zero percent, the only way to achieve RORs greater than the interest cost of the muni bonds is to throw the money into stocks.

As we can see from the above analysis, this will not end well…