Margin debt level is not too high -- yet

Recent articles such as this one or this one make the case that the level of  stock market margin debt today is at a dangerously high level. (Data on New York Stock Exchange Margin Debt is available with a two month delay here. )

The articles focus on a chart of NYSE Margin Debt like the one shown below.  The sharp peaks on the graph correspond to the Dot-Com crash of 2000 and the financial panic market collapse that got underway in 2007.  The graph gives the impression that the current spiking of margin debt must be pointing to another market crash coming sometime soon.  Or does it? Maybe the graph isn't showing the real story.

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Margin debt, like the stock market, has a long term trend of growing several percent year after year. Because of this fairly steady growth rate you can get a more helpful view by changing the vertical axis to a logarithmic scale, making the same data look somewhat less scary.

(Click on image to enlarge)

Look at a longer time period (since 1980) and add in a trend approximation line and an entirely different picture emerges -- current margin debt is not outrageously high. It may even be a bit lower than the historical trend.

(Click on image to enlarge.)

Even this graph may be making margin debt levels appear more worrisome than they are. In 1987 at the time of the crash margin debt was 68% greater than the historical trend.  In June of 2000 margin reached 130% above trend! And in 2007 margin debt was 67% above trend.  Today, in sharp contrast, margin debt is about 3% BELOW trend.

There are countless things about investing that might be worth fretting. But, today's level of margin debt doesn't deserve to be very high on the list of worries. In a couple of years margin debt levels may be worth your attention.