LEVERAGE IS THE LAST BUYER

“It’s not the buying that makes you money. It’s the waiting.”
— Charlie Munger

The most dangerous phase of every bull market looks exactly like the safest. Prices are calm. Volatility is low. Everyone feels richer. And beneath the surface, leverage quietly replaces liquidity.

THE HIDDEN FUEL OF EUPHORIA

FINRA’s latest data shows margin debt, money investors borrow against their portfolios to buy more stocks, has again crossed $1.1 trillion¹, the highest in history. Relative to GDP, it now sits near 3.7%², above the long-term average of 2.9%².

It’s not the level that matters. It’s the acceleration. Over the past quarter, margin debt grew faster than the S&P 500 itself, one of the few times this has happened in the last twenty-five years. The previous instances? 1999. 2007. 2021.

Each marked a period when optimism turned to conviction, and conviction turned to leverage.

‍

WHEN CONVICTION BORROWS MONEY

Leverage does not cause bubbles. It completes them. In early bull markets, cash is the fuel. In late bull markets, credit is.

When investors borrow against rising portfolios to buy more of the same portfolios, they create a feedback loop that looks like intelligence but is really momentum wearing a suit. Prices rise, collateral expands, and confidence compounds faster than earnings. Until it doesn’t.

Then the same leverage that inflated prices becomes a forced seller. Margin calls don’t debate. They liquidate.

‍

THE PATTERN THAT NEVER CHANGES

In 2000, margin debt peaked just before the dot-com collapse. In 2007, it surged before the housing crash. In 2021, it hit records ahead of the post-pandemic correction.

Each time, the story was the same:

• Investors justified leverage because “this time is different."
• Prices rose faster than fundamentals.
• When the inevitable volatility returned, the feedback loop reversed.

When the inevitable volatility returned, the feedback loop reversed. This is not doom prophecy, it’s human behaviour quantified.

‍

THE INTELLIGENT RESPONSE

Discipline is not the absence of risk; it’s the awareness of it. At INTELLIGENT INVESTING, our philosophy is simple: leverage is not alpha—it’s anesthesia. It numbs you to risk until the pain returns all at once.

High margin debt doesn’t guarantee a crash, but it guarantees fragility. And fragility demands respect. So while the crowd celebrates new highs, the intelligent investor calibrates.Trim excess. Strengthen liquidity. Focus on fundamentals that don’t rely on borrowed optimism.

The best investors don’t time the top. They simply avoid being the last buyer.

HOLD SIGNAL

When euphoria feels rational, hold signal.When discipline feels lonely, hold signal.When leverage looks like confidence, hold signal. Sanity is your competitive advantage.