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Margin Debt...

78Southwind

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A couple weeks ago I was at the USC Football game when some millennials pulled up to the table next to us and we started talking. One of them had gone to USC Marshall school and then after graduating he went on to a local Law School. We started talking about investments and he had done really well in the stock market the last year or so. I talked to him about crypto which he really didn't know much about (surprisingly) but he was excited about it. What got me concerned is that he only wanted to invest with margin. I told him he was crazy if he wanted to invest in crypto with margin since the market is so volatile. I also overheard him talk about him borrowing from his credit cards to fund the margin account then paying the monthly credit card payments with the margin account.

I always look for things that I see in normal everyday life to kind of keep me aware of the things I may be missing while watching the stock market. So today I went to FINRA to see what the total debt balances were in margin accounts. Yep, you guessed it record amounts of debt. Over 911 Billion...

https://www.finra.org/investors/learn-to-invest/advanced-investing/margin-statistics
 

Mandelon

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Everyone's a genius when the market goes up.

Realtor's brag how they sold a house over asking and in just a few days. Like it was some special sales technique and not just a hot market.

When every Tom Dick and Harry are in the market, you know things are gonna get squirrely!
 

MPHSystems

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margin is not a good idea. IMO, it can leverage gains in a bull but you can loose hard in a bear.
 

zhandfull

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911 Billion! What could possibly go wrong? :eek:
 
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zhandfull

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For us stoopid people...what is "the margin" of which you speak?
I thought you take extra money, buy stocks, hopefully stocks go up, sell stocks for profit, rinse and repeat
  • Margin trading occurs when you borrow money from your brokerage to pay for stocks using your margin account assets as collateral.
  • When you're required to add cash or securities to your account it's known as a margin call.
  • If you can't deposit the cash or stocks to cover the margin call, the brokerage can sell securities in your account.
 

mjc

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My son was doing margin on crypto earlier this year. He made a lot of money but it took constant monitoring of his crypto platform he was on(like almost 24 hrs a day).
 

DWC

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When i started in my current job 23 years ago a bunch of the early hires were buying .com companies on margin. They already had millions but were gonna REALLY make it big.. The lunch talk of how great things were went South quick. Early retirement quickly went to sticking around past retirement age.
 

TimeBandit

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I have too many .com stories and some wounds that took a long time to heal from that era.

Buying on margin is stupid... just like buying toys with a loan is stupid.

Spend less than you make eventually you'll have the cash to buy what you want.
 

checkrdpast

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  • Margin trading occurs when you borrow money from your brokerage to pay for stocks using your margin account assets as collateral.
  • When you're required to add cash or securities to your account it's known as a margin call.
  • If you can't deposit the cash or stocks to cover the margin call, the brokerage can sell securities in your account.

is that like "trading places" the movie?
 

DaveC

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I will add that only a certain value can be borrowed. So there is a minimum amount of “equity“ the investor must have in the account each day,

If the stocks value goes down below this minimum then the investor must deposit enough cash to meet the minimum. If they don’t then the brokerage could sell everything


  • Margin trading occurs when you borrow money from your brokerage to pay for stocks using your margin account assets as collateral.
  • When you're required to add cash or securities to your account it's known as a margin call.
  • If you can't deposit the cash or stocks to cover the margin call, the brokerage can sell securities in your account.
 

530RL

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Margin is a fancy word for debt.

Most “margin” their real estate investments whether it be their house or their rental.

The problem arises when the duration of the margin (debt) is less than the duration of the asset.

And then the squeeze happens.
 

wzuber

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Look
Margin is a fancy word for debt.

Most “margin” their real estate investments whether it be their house or their rental.

The problem arises when the duration of the margin (debt) is less than the duration of the asset.

And then the squeeze happens.
look at you Makin clean straight pretzels n shit.....lol
Nice simplification.
 

RiverDave

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Everyone's a genius when the market goes up.

Realtor's brag how they sold a house over asking and in just a few days. Like it was some special sales technique and not just a hot market.

When every Tom Dick and Harry are in the market, you know things are gonna get squirrely!

Warren Buffet says “It’s high tide right now, when the tide goes out we are going to see who’s wearing pants.” Lol
 

ChumpChange

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I had just started a business bank for an investment bank when the last downturn happened. There were margin calls everywhere on the IB side coming. They would be asking us to collateralize real estate in order to fulfill the calls so they didn’t have to liquidate at the bottom. Crazy times back then.
 

RiverDave

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I read threads like this and realize I know jack shit about making money..
 
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nowski

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  • Margin trading occurs when you borrow money from your brokerage to pay for stocks using your margin account assets as collateral.
  • When you're required to add cash or securities to your account it's known as a margin call.
  • If you can't deposit the cash or stocks to cover the margin call, the brokerage can sell securities in your account.

On a day like today in the market you could really be losing your ass especially if you bought your shares on margin.

In the dot.com day's I had racked up 50k on margin with my broker, lost my ass and took years to recover. I learned a valuable lesson, don't invest money you can't afford to lose and don't buy anything on margin...
 
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