Current liquidating margin

Posted by / 05-Feb-2018 08:26

This is a rite of passage that all investors have to go through on their way to cautious middle age, but with each new debt binge the stakes get higher.Now we’re talking total wipeout rather than painful but survivable life lesson, and systemic collapse rather than one or two bad years.These loans can also factor into brokers’ compensation, incentivizing many to extend money to clients regardless of whether they need it or not.Margin debt has been on the rise for years and is generally considered a gauge of investor confidence.At times, brokerage companies will add an extra premium to the minimum exchange margin rate to lower risk exposure.The margin is set based on the risk of market volatility.

Retail and institutional investors have borrowed a record 2.8 billion against their portfolios, according to the Financial Industry Regulatory Authority, as they try to pocket bigger gains by ramping up their exposure to stocks.Investors tend to do this when markets are rising and using leverage seems like an effortless way turbocharge their gains.But eventually the market turns down, leaving stock portfolios insufficient to cover related margin debt and generating “margin calls” in which brokers demand more money and/or start liquidating customer portfolios.Real estate prices in trophy cities have exceeded their 2007 extremes.Debt levels in the developed world (and China) have blown through their previous cyclical peaks.

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