Another perspective on NYSE margin debt

A client writes: “Regarding margin debt, I laugh whenever the media first bring it up – always as soon as the nominal figure hits old nominal high.  The problem is that they never adjust for inflation.  As you are well aware we need the S&P 500 Index to perhaps hit 1700+ in order to reach 2007 high in real terms, and consequently we need a lot more margin debt to match 2007.

He adds, “Personally I’d establish real inflation as approximately:

2007 – 5%
2008 – 1%
2009 – -2%
2010 – 1%
2011 – 3.5%
2012 – 4.5%

“I could be wrong in Ben's eyes, just my observation/understanding within a margin of error of course.”

Comment: I think it’s worth adding that on a year-over-year basis, NYSE margin debt is not only still well below its 2007 peak, but is also currently below its 2010 peak prior to the “flash crash.”  See chart below from HaysAdvisory.com.