Margin debt hits a record, and retail is trading with borrowed money
Margin debt at US brokerages now exceeds total US credit card debt, and a leveraged ETF crash in Korea forced the liquidation of 360,000 accounts, most of them belonging to people under 35.
The video won't play here. Listen to the audio instead:
The argument · tap a timestamp to hear it
Margin debt has passed credit card debt
Total margin borrowing in US stocks has hit a record, over $1.5 trillion, 50% higher than a year ago. A more intuitive comparison: total margin debt in the US brokerage system now exceeds total US credit card debt. In other words, money borrowed to trade stocks is now greater than money owed on credit cards. Making money with other people's money is great, until the market falls — the loan and the interest still have to be paid. Yale finance professor Heather Tewks says that when a stock falls too far, investors have only two choices: sell the stock to repay the loan, or put more money into the margin account.
— Waylon Wong / Ricky MulveyIndia gave academics a natural experiment
Heather Tewks and her co-authors chose to study India because Indian regulators designed the rules in a way that is friendly to scholars: there is a clear dividing line between which stocks can be bought on margin and which cannot. That constitutes a natural experiment for testing whether margin trading really causes market instability. The conclusion is yes — margin does play a role, especially during financial crises. There is an amplification effect on the way down: the basket of margin-eligible stocks fell significantly more than the basket of non-margin-eligible stocks. Many margin investors were forced to sell holdings to repay loans, and that forced selling amplified the overall losses.
— Heather TewksKorea turned leveraged ETFs into a national game
The same mechanism just played out in Korea. Investors piled into SK Hynix and Samsung, the two companies making memory chips for AI data centers that dominate the Korean stock market. Fidelity global macro director Yurian Timmer describes it this way: semiconductor earnings tripled over the past year, everything felt like it was on fast-forward, a boom-bust cycle amplified across multiple dimensions. Earlier this year Korea legalized single-stock leveraged ETFs — they look like ordinary ETFs on the outside, but inside they hold leverage, futures and various financial tricks to amplify gains, and losses are amplified just the same. Such products have been legal in the US since 2022, and Korea wanted to catch up. On some days these ETFs accounted for 20% of volume on Korean exchanges.
— Yurian TimmerThe fundamentals were fine, and the accounts still went to zero
Yurian Timmer's assessment of these instruments: ‘I call them weapons of self-destruction, and I don't understand why regulators approve these things.’ His pessimistic call was at least borne out in Korea: the Korean stock market's market cap at one point fell 40%. At the company level, memory chip demand is still forecast to be strong, but investors were no longer as excited, leveraged bets began to unwind, and margin traders were forced to sell. More than 3% of Korea's adult population received margin calls. Goldman Sachs estimates that about 360,000 brokerage accounts were forced to liquidate all holdings to repay debt, and Citi data shows most of those accounts belong to people under 35. Yurian's summary: the fundamentals of these companies are perfectly fine, the problem is just that you slid too far forward, and with leverage you can lose your entire principal.
— Yurian TimmerThe Fed has a tool it hasn't touched in decades
In the US, margin debt is also at a historic high, and the Fed actually has a little-known responsibility: setting how much money investors must have in their own pockets to borrow a dollar. Back to the opening example — you have $50 and want to buy $100 of Apple stock, the Fed can say, be careful, the broker can only lend you $25 instead of $50. The Fed fiddled with this requirement in the years after the Great Depression, and that crash came right after margin debt surged and blew a bubble. But Yurian thinks we are not yet at the panic point: during the 2000 internet bubble the rate of change in margin debt was 81%, today it is about 40%, much slower. He calls the current moment a yellow zone, not a panic point. The Fed has not touched this requirement since 1974, and when reporters contacted its press office, no one was willing to respond on the record.
— Yurian TimmerSpotting a bubble is easy, timing the pop is hard
Yurian Timmer thinks the Fed may be reluctant to intervene in margin trading for a simple reason: the Fed generally does not want to get mixed up in the stock market and bubbles, they think no one can predict these things. Greenspan called the Nasdaq a bubble back in 1996, and it ran for another four years. So the Fed is at least humble enough to know it cannot time these things. Spotting a forming bubble is easy, timing the pop is much harder — you do not want to shut down a party that might keep going for a long while.
— Yurian TimmerA quarter of Gen Z treat sports betting as investing
The line between investing and gambling has already blurred. Over the past year, more than half of Gen Z said they used money originally meant for investing to place sports bets. Sports betting ads keep promoting free bets like ‘deposit $5, get $300’, making betting look like easy money. Eight years after the federal sports betting ban was overturned, the impact on young people is only now showing up. In a recent survey, about a quarter of Gen Z said they see sports betting as a high-risk investment strategy, or a way to reach a goal faster. Dan Egan, vice president of behavioral science and investing at Betterment, says the danger is that we start treating a hobby as an investment — like people who collect cars, who honestly admit that is not making money, it is a hobby.
— Adrian Ma / Dan EganColorado chose to add friction for bettors
State governments are starting to respond to the negative effects of sports betting, including addiction. Colorado passed a new law making it the first state that allows sports betting to ban betting companies from sending push notifications and texts to customers — those ‘hey, looks like there's a game, want to bet’ reminders are cut off. The bill also limits how many times a single customer can deposit in one day, capped at six. Co-sponsor and Democratic state senator Matt Ball says he is not trying to ban gambling; he has bet on sports himself and has been commissioner of a fantasy league for 15 years, but people in his district came to him about the issue, from a mother whose son came home from college and ran up $15,000 on a credit card in one night, to problem gambling experts nationally. Problem gambling is linked to more bankruptcies, loan defaults, domestic violence and suicide. Matt himself admits: we do not have any data, and to some extent we are guessing.
— Matt BallIn their own words · checked verbatim
The total amount of borrowing is at an all-time record level over $1.5 trillion. That's up by 50% from a year ago.
Waylon Wong1:00
It's during those downswings that we get this amplification. The margin basket of stocks went down significantly more than the basket of non-margin stocks during the crisis.
Heather Tewks3:03
I call them weapons of self-destruction. I don't know why regulators approve these things.
Yurian Timmer6:05
You look at the fundamentals of these companies, they're fabulous. So it's just a matter of you're in over your skis, and when you use leverage, you can lose all your capital.
Yurian Timmer6:05
Spotting a bubble forming is easy. Timing the pop is much more difficult. You don't want to shut down a party that could keep rocking for a while.
Yurian Timmer9:13
I think the dangerous aspect is when we start confusing our hobbies for investing.
Dan Egan12:18
When you have a problem, you might set a budget. I've got $100. I'm going to bet it. This weekend, you blow through that. Hey, I got to make it back. You deposit $200, right? You lose that. You deposit $400. You just keep chasing your losses.
Matt Ball16:33
Figures
| Total margin borrowing in US stocks | Over $1.5 trillion, +50% year over year | 1:00 |
| Maximum decline in Korean stock market cap | 40% | 6:05 |
| Share of Korean adults who received margin calls | More than 3% | 6:05 |
| Rate of change in margin debt during the 2000 internet bubble | 81% | 8:11 |
| Current rate of change in margin debt | About 40% | 8:11 |
| Last time the Fed adjusted margin requirements | 1974 | 8:11 |
| Daily deposit limit set by Colorado | 6 | 16:33 |
| Leveraged ETFs as share of Korean exchange volume | Up to 20% on some days | 5:05 |
| Change in semiconductor earnings over the past year | Tripled | 5:05 |
Glossary
- margin trading
- Borrowing money from a broker to buy stocks, using your own funds as collateral, with both losses and interest amplified.
- margin call
- A broker demanding that an investor add money or sell holdings, otherwise forcibly liquidating positions to cover the loan.
- single-stock leveraged ETF
- An ETF that tracks a single stock and uses leverage and futures internally to amplify gains and losses.
- prediction market
- A market for betting on the outcome of events, such as Polymarket and Kalshi, a different category from sports betting.
How to listen
Investors and finance professionals watching retail leverage, brokerage risk controls and regulatory moves; people building consumer finance or betting compliance products also get a Colorado regulatory sample.
The sports betting half (from 11:16) is thin on information; you can listen to just the Korea leverage blowup half.