People write about the size of margin debt in absolute terms,
and some compare it to GDP, but the correct denominator IMO is
market cap. I don't have the numbers in front of me, but
compared to market cap it is not that crazy. Even when one
adds in the debt of leveraged ETFs, which are actually not that
large compared with the overall equity market, it's high but not
off the charts.
As regards a CAPE of 40+, which is indeed very expensive, I have
been concerned about that for a while, to my detriment. But
there is no hard limit at the previous high of 44. Remember
Japan went to a CAPE of 100. They had a simultaneous property
+ equity bubble, and I would not wish that on anyone. And
that is why it took decades to work off, instead of only one
decade, like the dot com bubble took the US to digest.
Newsletter
Subscribe to our email list for regular free market updates
as well as a chance to get coupons!
People write about the size
Warren Buffett just shared a 10-word warning with investors. Here's ...
Posted by joss22 on 28th of Jul 2026 at 04:00 pm
People write about the size of margin debt in absolute terms, and some compare it to GDP, but the correct denominator IMO is market cap. I don't have the numbers in front of me, but compared to market cap it is not that crazy. Even when one adds in the debt of leveraged ETFs, which are actually not that large compared with the overall equity market, it's high but not off the charts.
As regards a CAPE of 40+, which is indeed very expensive, I have been concerned about that for a while, to my detriment. But there is no hard limit at the previous high of 44. Remember Japan went to a CAPE of 100. They had a simultaneous property + equity bubble, and I would not wish that on anyone. And that is why it took decades to work off, instead of only one decade, like the dot com bubble took the US to digest.