We are in store for the margin call to potentially end all margin calls. The peak of margin debt, one of the primary factors in the 2000 dotcom bubble collapse, never got close to $100B.
Investor margin debt is currently over $300B. And as the below chart reveals, that very margin debt (this time, concurrent with Fed money printing liquidity) has bid up stock market asset prices.
Remember, when the market falls dramatically, margin sellers don’t get to wait it out. Brokerages and banks sell their shares whether they want them sold or not in order to make sure they get their loan back before shares go to zero. And that selling drives further margin selling. It’s a hellish recipe for incredible, unstoppable losses that happen at breathtaking speed.