Margin debt hit another record high in March to top $822 billion, according to FINRA data

• FINRA margin debt hit another record in March at $822 billion.
• The figure represents a 71% year-over-year jump in margin debt usage.
• Margin debt is used by investors to buy securities or sell a stock short.

Investors are trading on margin like never before, despite the risks associated with the practice.

According to newly released data from FINRA, margin debt rose 71% year-over-year to hit a record $822 billion in March.

That's a 1.1% increase over February's previous record high of $813 billion.

Margin debt previously spiked to record highs before the dot-com bubble and in 2007 just three months before the 2008 financial crisis.

The chart below from Advisor Perspectives illustrates just how closely margin debt tracks with the S&P 500.

When The Wall Street Journal asked James Angel, a Georgetown University finance professor, about the trend of rising margin debt back in December of 2020 the professor said "the stock market is euphoric right now" and that "a lot of people are extrapolating from the recent past."

"We've seen this play out before, and it doesn't end well," Angel added.

On the other hand, in January, Bank of America told its clients that "investors are not over-levered in terms of margin debt as a percentage of the S&P 500 market cap, with room to run when compared to 2007 through 2018 peak levels."

Since January, margin debt has risen another 3%, but the pace of increase isn't as fast as it was in 2020.

Still, a number of experts have warned about the use of excessive margin debt, including Edward Yardeni, the president of the consulting firm Yardeni Research.

Yardeni told the Wall Street Journal that margin debt "fuels bull markets and it exacerbates bear markets and to a certain extent you put it on the list of irrational exuberance."

"The further that this stock market goes, the higher that margin debt will go, and when something blows up that will be one of the factors for why stocks are going down," Yardeni added.

Michael Burry also warned about record levels of margin debt in the financial system back in February before taking down his Twitter account.

"Speculative stock #bubbles ultimately see the gamblers take on too much debt," the investor tweeted along with a chart showing the S&P 500 and levels of margin debt both soaring in recent months.