Margin debt is at its historic highs since 1990. What might this imply? Possibly that the exuberence in the equity markets has become frothy:
The two time series do not have a spurious correlation. Markets go up means that investors want to join in even if he/she does not have the money to buy. Margin goes up, margin users are buying, buyers push up prices. This merry-go-round happens until it runs out of steam…or until the Federal Reserve chairman decides to take away the punch bowl.