Investors Borrowed $1.45 Trillion to Buy Stocks: Is Record Margin Debt a Warning or Just Noise?

SPEAKER_1 (0:01)

This is InvestTalk from KPP Financial, helping investors make sense of the markets one day at a time. Here's your host, Justin Klein.

Justin Klein (0:16)

Good afternoon, fellow investors, and welcome back to InvestTalk. This is our Wednesday, September 23rd, 2026 edition of InvestTalk. I'm excited for this hour with you, a lot to unpack on today's show as yields are moving higher once again.

This is a new environment. I've been saying this for a number of years now. We are now in inflationary world. The deflationary world is behind us. That means higher rates, and that means different asset classes are going to react differently from harder commodity assets to real estate to equities.

So you have to in many ways throw out the playbook of the 80s, 90s, and 2000s and 2010s. This is the 2020s. It is a new regime. And we are here to unpack it all for you, give you some perspective, give you data, give you or answer your questions, whatever's on your mind. We're here to help you. So don't hesitate to reach out as always at 888-99-CHART. And here's a quick heads up. The date is getting closer. We are approaching October 24th. We're now about a month away, right? Tomorrow's September 24th. And it's a Saturday. So we're inviting you to join us for the InvestTalk Retirement Summit.

Luke and I are gonna speak on different topics. He's gonna be focused more on investing. I'll be focusing more on planning. And then we have three guest speakers, one on estate planning, another on real estate, and then another on taxes. So this is going to be a really exciting event. We have some great speakers lined up. It's free of charge, but seating is limited. So you must pre-register over at investtalk.com. Now in just a bit, we'll talk about today's marked performance. We'll run down the show topics for the hour. But first, let's tackle this first caller question now.

SPEAKER_3 (2:32)

Hi, Justin and Luke. I would just love your take on McDonald's ticker, MCD.

You know, it's been on my watch list for years and years now and it recently triggered an alert for me down here in the lower 240s, upper 230s and seems like a great valuation long term here. And so we just love your opinion on adding a position or starting to sell some puts down here. Thanks again. I'll listen on the podcast.

Justin Klein (3:06)

I like that last part, selling some puts, selling puts to get into a position, waiting for it to get to a level where, okay, it might be worthwhile at that point to step in. And it may not get there in time, but you sell those puts going out 30, 60 days, something like that, and earn some premium. I kind of like that. Now, McDonald's was down pretty big today, down over 4%, which for McDonald's, that's a big move. And a lot of things within the consumer staples sector are struggling.

And McDonald's is just one of them. They sell inexpensive meals.

And those meals need to get to all of their stores, the raw ingredients. And that takes diesel. So the cost, their input costs are going to go up. Plus they have a good amount of debt in their balance sheet. That's about $60 billion in debt on $168 billion market cap. Now that's not a crazy ratio, but it is billions of dollars and tens of billions of dollars in debt. And when the cost of capital goes up, that means those debt costs are going to go up. So that's going to weigh on profits. And you see that with, let's take a look at earnings this year. Our expect to be up 6% and 8% next year, but those estimates both are coming down and that's why you're seeing a correction. Now let's take a look at its enterprise value, the EBITDA estimates going forward. It's about 14.8. Now that is kind of in the low end that it's been at for a number of years. So that's kind of a good thing. So you're getting to levels. Let me give you a better level though.

207, yeah, in that range. Low 200s to 205, 210, somewhere around there. That would be the buy point for me. I'd be very patient on it. I do think it will continue to head lower because of that debt level, because of higher input costs due to diesel and food inflation, and all of that. It's going to squeeze their margins. It's going to force them to raise their prices, which likely will lower their volume, et cetera. So I would probably sell puts around that, maybe 210 level. That's probably a good number to sell it at. Maybe go out to, I don't know, January?