We had a server outage, and we're rebuilding the site. Some of the site features won't work. Thank you for your patience.
imc indymedia

Los Angeles Indymedia : Activist News

white themeblack themered themetheme help
About Us Contact Us Calendar Publish RSS
Features
latest news
best of news
syndication
commentary


KILLRADIO

VozMob

ABCF LA

A-Infos Radio

Indymedia On Air

Dope-X-Resistance-LA List

LAAMN List




IMC Network:

Original Cities

www.indymedia.org africa: ambazonia canarias estrecho / madiaq kenya nigeria south africa canada: hamilton london, ontario maritimes montreal ontario ottawa quebec thunder bay vancouver victoria windsor winnipeg east asia: burma jakarta japan korea manila qc europe: abruzzo alacant andorra antwerpen armenia athens austria barcelona belarus belgium belgrade bristol brussels bulgaria calabria croatia cyprus emilia-romagna estrecho / madiaq euskal herria galiza germany grenoble hungary ireland istanbul italy la plana liege liguria lille linksunten lombardia london madrid malta marseille nantes napoli netherlands nice northern england norway oost-vlaanderen paris/Île-de-france patras piemonte poland portugal roma romania russia saint-petersburg scotland sverige switzerland thessaloniki torun toscana toulouse ukraine united kingdom valencia latin america: argentina bolivia chiapas chile chile sur cmi brasil colombia ecuador mexico peru puerto rico qollasuyu rosario santiago tijuana uruguay valparaiso venezuela venezuela oceania: adelaide aotearoa brisbane burma darwin jakarta manila melbourne perth qc sydney south asia: india mumbai united states: arizona arkansas asheville atlanta austin baltimore big muddy binghamton boston buffalo charlottesville chicago cleveland colorado columbus dc hawaii houston hudson mohawk kansas city la madison maine miami michigan milwaukee minneapolis/st. paul new hampshire new jersey new mexico new orleans north carolina north texas nyc oklahoma philadelphia pittsburgh portland richmond rochester rogue valley saint louis san diego san francisco san francisco bay area santa barbara santa cruz, ca sarasota seattle tampa bay tennessee urbana-champaign vermont western mass worcester west asia: armenia beirut israel palestine process: fbi/legal updates mailing lists process & imc docs tech volunteer projects: print radio satellite tv video regions: oceania united states topics: biotech

Surviving Cities

www.indymedia.org africa: canada: quebec east asia: japan europe: athens barcelona belgium bristol brussels cyprus germany grenoble ireland istanbul lille linksunten nantes netherlands norway portugal united kingdom latin america: argentina cmi brasil rosario oceania: aotearoa united states: austin big muddy binghamton boston chicago columbus la michigan nyc portland rochester saint louis san diego san francisco bay area santa cruz, ca tennessee urbana-champaign worcester west asia: palestine process: fbi/legal updates process & imc docs projects: radio satellite tv
printable version - js reader version - view hidden posts - tags and related articles

Wall Street Rally: Hold the Cheers

by Stephen Lendman Friday, Aug. 28, 2015 at 9:50 AM
lendmanstephen@sbcglobal.net

Wall Street

Wall Street Rally: Hold the Cheers

by Stephen Lendman

Days of market turbulence likely haven’t ended. They’ve been more severe than any time since late 2008/early 2009.

Hindsight may show upswing days were classic dead-cat bounces - a combination of short-covering and market manipulation.

An August 26 Wall Street Journal article should give investors pause - headlined “Margin Calls Bite Investors, Banks,” saying:

“Loans backed by investment portfolios have become a booming business for Wall Street brokerages. Now the bill is coming due - for both the banks and their clients.”

Bank of America and other lenders are issuing margin calls. Investors either have to put up more money to cover portfolio losses or sell holdings underlying their loans.

“Banks…are likely to take a hit to a key profit source if investors pull back from these loans as many expect,” said the Journal.

As of June 30, Morgan Stanley had $25.3 billion in equity loans - 37% higher than last year. Bank of America’s Merrill Lynch division had $38.2 billion in loan volume. Wells Fargo had $59.3 billion. Other Wall Street banks and brokerages issued huge amounts of credit - investors borrowing at low interest rates, taking full  advantage of bull market profit potential.

Things go as expected on upswings - polar opposite when they turn sour. Margin calls in enough volume can kill a bull market. When investors have to put up cash to cover losses, selling holdings usually follow, driving markets lower, how far for how long remains to be seen if beginning to occur now.

Zero Hedge called the Journal’s article “one of the most concerning and troubling finance/economics related articles…all year.” It explained the following:

Brokers let investors “take out loans of as much as 40% of the value from a portfolio of equities, and up to a terrifying 80% from a bond portfolio. The interest rates are often minuscule, as low as 2%, and since many of these clients are wealthy, the loans are often used to purchase boats and real estate.”

The Journal explained securities-base loans as follows:

“(T)he customer pledges all or part of a portfolio of stocks, bonds, mutual funds and/or other securities as collateral.”

“But unlike traditional margin loans, in which the client uses the credit to buy more securities, the borrowing is for other purchases such as real estate, a boat or education.”

“Securities-based loans surged in the years after the financial crisis as banks retreated from home-equity and other consumer loans.”

“Amid a years long bull market for stocks, the loans offered something for everyone in the equation: Clients kept their portfolios intact, financial advisers continued getting fees based on those assets and banks collected interest revenue from the loans.”

“(D)angerously high margin balances,” followed, according to Circle Squared Alternative Investments president Jeff Sica. When markets decline, margin calls rise - sharply if downturns continue.

With equity valuations way over-extended - at bubble levels vulnerable to bursting, the risk of markets crashing is greatest since 2008.

Stephen Lendman lives in Chicago. He can be reached at lendmanstephen@sbcglobal.net.

His new book as editor and contributor is titled "Flashpoint in Ukraine: US Drive for Hegemony Risks WW III."

http://www.claritypress.com/LendmanIII.html

Visit his blog site at sjlendman.blogspot.com.

Listen to cutting-edge discussions with distinguished guests on the Progressive Radio News Hour on the Progressive Radio Network.

It airs three times weekly: live on Sundays at 1PM Central time plus two prerecorded archived programs.
Report this post as:
Share on: Twitter, Facebook, Google+

add your comments


© 2000-2018 Los Angeles Independent Media Center. Unless otherwise stated by the author, all content is free for non-commercial reuse, reprint, and rebroadcast, on the net and elsewhere. Opinions are those of the contributors and are not necessarily endorsed by the Los Angeles Independent Media Center. Running sf-active v0.9.4 Disclaimer | Privacy