This page has been archived and commenting is disabled.
The Reason For The Selloff: Microcap Traders Punk'd With 100% Interactive Brokers Margin Hike
The massive outperformance of the smallest and most trashy companies over the past year, month, week, day etc... stalled this afternoon. No news; no macro data; no change in the situation in DC. So what was it? We suspect the answer lies in the all-time record levels of margin that we recently discussed holding up the US equity market. Interactive Brokers, it would appear, have seen the light and over the next week or so will be increasing maintenance margin to 100% - effectively squeezing the leveraged momentum chasing muppets out of the market (or at the very least halving their risk-taking abilities).
As we warned previously,
Margin Debt still contrarian bearish
Using closing basis monthly data, peaks in NYSE margin debt preceded peaks in the S&P 500 in 2007 and 2000. The March 2000 peak in NYSE margin debt of $278.5m preceded the August 2000 monthly closing price peak in the S&P 500 at 1517.68. The July 2007 margin debt peak of $381.4m preceded the October 2007 monthly closing price peak of 1549.38 for the S&P 500. Margin debt reached a record high of $384.4m in April and the S&P 500 continued to rally into July, August, and September. This is a similar set up to 2007 and 2000.
Bonus Chart - Margin debt: the long-term overlay
Going back to January 1959, margin debt and the S&P 500 have moved together for the most part. But leverage is a double edge sword and can exacerbate sell-offs, leading to deeper than expected market pullbacks.
Still think the "market" is driven by earnings or fundamentals? or just leverage and marginal credit expansion (shadow banking repo... etc.)?
- 19398 reads
- Printer-friendly version
- Send to friend
- advertisements -





Dive! Dive! Dive!
Looks like that is part of the plan.
If the markets don't sell off on the fact that our elected representatives are incompetent liars, market restricting margin hikes should do the trick.
Then we can play the media blame game when the crash happens.
That chart tells me that leverage is about to break out to the upside.....its the only way Ben can keep moving moar up...
IB will be investigated by the Justice Dept by Friday
Thank God that Tesla (TSLA) is not on the list. It is the best-est stock in the world ever.
Good, I hope the Russel 2000 comes back to earth so that I can chop off its head.
Look closely at the list of affected stocks. Only stocks below $250MM in market cap- nowhere near the whole Russell 2000.
Is Tweeter in that list? (TWTRq)
Yeah...I know....guilt by association.
The Russ is a big zit waiting to be popped.
Ugly bitch.
http://www.marketwatch.com/investing/index/rut/charts
Margin just means I make more money, nothing bad.
Exactly, go max out your credit card and refi your house to buy more TSLA or PCLN.
Tell your friends, enemies...anybody who will listen. Please, do this.
Margin...... Bitchez
We all know we're just days from the rumor of a settlement....and a 200 point whipsaw advance. It's all bullshit!!!
Market down but Maria has nugget nipples over something.
Wow, those are some big ones.
So if you have real genuine fiat in your pocket, it might be tempting to short the listed names....si or no...or too late...?
Didn't the same s**t happen in October 1929 ?
That was then, this is now.
<sarc>
Herbert Hoover wasn't a muslim.
Why are they doing this? Stocks only go up - what don't they get about that? Give me more margin so I can buy more, make more easy money and afford more margin. How am I suppose to do that if they raise margin requirements? I am ENTITLED to margin, you IB bastards!
People who don't work are also entitled to housing. That only goes up too.
Shall zerohedge rename their website margincall ?
So IB is raising margins but what about all the other brokers?
Interactive has been the most aggressive on margins for a while now.
This seems to be a rare attack of sanity.
Meh. It's mostly biotechs and a few asset managers. Not *all* microcaps.
Do you have a pic of an "Interactive Muppet?"
That is two warning shots. The first being margin raises from the CME. Now don't forget the PPT reports to Obama and he is on a power trip to punish all his enemies.
Obomber couldn't get the market to sell off with his 'warning' unlike his buy stawks before, so now behind the scenes he is getting margins to be hiked.
Margins hiked on shares?? In this new BTFATH 'market'? Not unless TPTB wanted the 'market' lower
Something big cometh. Popcorn at the ready.
Oh man, speaking of popcorn I was accosted by the cubscouts going into the grocery store on my way home this evening. I said to the kid I'll think about coming back. Of course what I was buying was very light and I only had a $20 in my pocket (I'm in workout clothes). Then the kid bemoans: "Oh man, how come everyone who goes in never comes back out our way" (because there are two enterances and they were not smart enough to put tables at both) to the world in general.
So I come back out, I have $14 and change on me. Of course the person doing most of the talking is the mother, and there's a dad that later came up (probably not related) to the table. And I'm a decent guy, I was in cub scouts and later boy scouts so I figure I'll buy some popcorn even though I know it's gouging me a couple FR notes. No big deal.
But the item I was interested in was this little 16oz. container of Sour-Cream & Onion Popcorn. I thought it was interesting and I'm a healthy guy but I'll eat some crap occasionally, nad you know what she said "That's Twenty Dollars"
"Twenty? You're kidding. When I was doing this it was maybe around five bucks" Of course the dad starts talking about "well inflation, yada yada" But I explained to them that they really need to start sending letter to Trail's-End (all the parents; en masse) telling them to calm down on prices. So I left a couple bucks in their donation jar and said not to worry about the popcorn and of course the dad semi-sincerely thanked me.
At what point does a cute fundraiser become a rip-off?
No wonder no one was coming back out their side and going out the other door.
Sad. I will no longer support Girls or Boy Scouts. Not that I don't like GLBT people - I don't support anyone who pushes an agenda. I don't give a damn about anyone's sexual orientation - it is none of my business and I don't give a shit so don't tell me about it.
The Boy Scouts caved so I have no use for them. Girl Scouts caved ages ago.
It's about time, others feel how the "SQUEEZE" feels!!
more, much more...just say'n
It's a kick in the toy dolls farce when we're reduced to cheering for failure and rightly so as this bubble ponzi needs to blow!
Also Maria Bart looks like a banged out porn star and has an arse like a barn door.
I like Weiner
Good stuff on IB and new margin requirements, but I must admit I don't understand the constant emphasis on overall margin debt. No I am not a fan of debt and yes I do think we're in a bubble, but assuming a constant leverage ratio, wouldn't margin debt by definition increase as market prices increase? Maybe I'm missing something but I don't understand the constant emphasis on that data point. There are plenty of other scary ones out there.
So really, the dumbed down version of what you're saying is the important # is the distance (+or-) between the black and red lines (in the Margin debt/S&P overlay chart). Seems like a much simpler way to put it?