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Jamie Dimon doesn’t spook easily, so when the JPMorgan CEO says leverage is flashing, it’s worth a look. Last week he told CNBC that “margin debt is the highest it has ever been” — and warned that a lot of borrowing is hiding in plain sight. “There’s a lot of margin debt you don’t see because it’s not called margin debt,” he said. “It’s called other things” (1).
He’s right, and the data backs him. Investor margin debt hit a record $1.53 trillion in June, up more than 50% in a single year (2). It’s now climbed to nearly its highest share of the market since 1997 — the eve of the dot-com bust (5).
High leverage — borrowing money to buy securities — is often a sign that markets are overvalued and in danger of imminent collapse. That’s one of the factors in the crash of 1929, and also the crash of 1987, which I experienced personally as a Wall Street stockbroker.
To be clear, Dimon did not predict a crash. He said flatly, “I’m not going to say it’s systemically high, that it’s going to cause a disaster” (1).
The real danger of high leverage is being forced to sell into it — just ask the $45 billion hedge fund that imploded recently when its leveraged tech bets unwound (6).
You may think there’s no leverage in your portfolio, but you may be wrong. Here are five kinds many people miss.
1. The margin you forgot you switched on
Start with the obvious one that hides in plain sight. A lot of brokerage accounts come with margin enabled by default, and plenty of people borrow against their holdings without ever thinking of it as “leverage.”
That’s a big part of Dimon’s record number — investors have piled on half a trillion dollars of new margin debt in a year (2). If you’re not sure whether your account is a margin account, that’s the first thing to check today. Borrowed money feels free right up until the day it isn’t.
2. Leveraged ETFs — the amplified bet that quietly decays
This is the one Dimon specifically named, and it’s where a lot of everyday investors are leveraged without realizing what they own. Funds like the 2x and 3x ETFs promise to multiply the market’s daily move.
Here’s the catch the ads skip: the SEC and FINRA warn these funds reset every day and are built to be held for a single trading session — over longer stretches, the math decays and your results can differ wildly from the “3x” you expected (3). Leveraged ETF assets have doubled to roughly $190 billion in a year (4). And the risk is real: one 3x semiconductor ETF dropped 31% in a single day this June (5).
You can’t get a margin call on these — but make no mistake, it’s leverage in a wrapper. If steady beats thrilling for you, there are lower-risk ways to earn a return.
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3. The concentration hiding in your “safe” index fund
You might think an S&P 500 fund makes you diversified. But a huge slice of it now rides on a handful of the same AI and mega-cap names, and valuations by Robert Shiller’s respected CAPE measure sit near levels last seen before the dot-com crash (5).
That’s not leverage exactly, but it’s the same trap Dimon flagged: when everyone crowds into one bet, a single shock triggers a stampede. That’s precisely what sank that $45 billion fund (6). The trouble is, you can’t easily see your own hidden concentration — but a professional can.
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4. The “income” funds with derivatives you never signed up for
Walk carefully around the wave of options-income, buffer, and covered-call ETFs being marketed to retirees as easy “yield.” Many of them bury derivatives and complex structures — with caps, costs, and downside risks the glossy pitch doesn’t spell out.
The SEC flags exactly these kinds of complex products as easy to misunderstand (3). If you bought one chasing the dividend, do yourself a favor and read what’s actually under the hood.
5. The only leverage that truly wrecks you: being forced to sell
Here’s Dimon’s real point — and mine, after watching every crash since 1987. Leverage alone doesn’t cause disasters. But when there’s lots of leverage in the system, it’s a warning sign.
The danger isn’t owning stocks when a “quick disruption” hits. It’s being forced to sell them at the bottom — because you’re on margin, or over-allocated to stocks right before you retire, or spooked into dumping everything.
The bottom line
Dimon isn’t ringing an alarm bell, and neither am I. Leverage being high isn’t the same as a crash coming — plenty of markets have run hot for years. Anyone screaming “sell everything” is as wrong as the folks pretending record borrowing doesn’t matter.
The honest move sits in the middle. Find out where you’re quietly carrying more risk than you meant to, trim what doesn’t belong, and build enough cushion that the next sudden drop is someone else’s emergency, not yours.
Because when the forced sellers are stampeding for the door, the person who planned ahead isn’t running. They’re the ones calmly picking up what the sellers are throwing away.
Sources: CNBC (1); Advisor Perspectives / FINRA (2); SEC & FINRA Investor Bulletin (3); Seeking Alpha (4); Congress.net (5); International Business Times (6).
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