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"Major Risk Should The Market Drop": BofA On Fresh Record Low In NYSE Investor "Net Worth"
While we have argued previously that looking at NYSE margin debt in isolation is quite meaningless for two simple reasons: i) in the New Normal hedge funds and algos, not retail and certainly not traders on "lit" venues like the NYSE but instead in dark pools, are the marginal traders, and ii) the relevant trading leverage is obtained from the "shadow banking" and repo markets, not plain vanilla margin debt from exchange clerks, monthly NYSE trading stats do provide some sense of just how levered the individual investor is, and what it may portend for the market should there be a selloff. Which is why we were not surprised to see that based on August data, the trend has continued: while NYSE margin debt rose once again, from $460 billion to $463 billion, just shy of the record set in February when it hit $466 billion and well above the previous bubble peak, it is the investor "Net Worth", or Net Free Credit as some call it: the difference of total free credit + cash balances and margin debt, that for the second consecutive month sank to a fresh record low of ($183) billion.
Why is this important? Here is BofA's just released explanation:
Risk: NEW LOW for Net free credit at -$183b is major risk should the market drop
Net free credit [ZH: aka "investor net worth"] is free credit balances in cash and margin accounts net of the debit balance in margin accounts. Net free credit dropped to -$183b and moved to a new low below the prior record of -$178b in February. This measure of cash to meet margin calls remains at an extreme low or negative reading below the February 2000 low of $-129b. The risk is if the market drops and triggers margin calls, investors do not have cash and would be forced to sell stocks or get cash from other sources to meet the margin calls. This would exacerbate an equity market sell-off.
Which, incidentally, is why the NY Fed can not afford a sell-off, as what would start as a contained modest drop of 1, 2, 3% or thereabouts, will promptly cascade into a full blown rout as uber-margined investors, who are trading now almost entirely on credit, get their margin yanked from under them as their equity accounts are wiped out. Which should also explain why after yesterday's "rout" which pushed stocks a whopping 2% below their all time highs, things should be quickly back to their low-volume, USDJPY-driven levitating normal.
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Every single asset is leveraged up as collateral for gambling
Dow, oil, bonds, copper etc cannot drop, they can only crater
The financial system is to rigged too even make sense better look at the policical events keep your eyes on Saudi Arabia: where the chicken come home to roost!
I use the disconnect and dibelief of the Saudi elite to predict that just a few months and Saudi Arabia will burn its 1001 nights.
Pentagon + Saudi alliance makes and breaks, basically
FUCKING HILARIOUS!
More leveraged than ever in history. Individuals, corporations & Governments.... This is the cancer that is eating our societies around the world. This is the cancer that wil be root cause of the coming war, as globalization inevitably fails. Good bye Keyens....and hello friedman.
there's only so much credit/leverage to go around. when margin can no longer be used, there will simply be no buyers left. the Fed can stop a wipe out WHEN it happens. THEY REALLY CANT.
The printers are in control.....they'll bill your grandkids for it.
Not at all.
Money is not edible
Grandkids won't pay for us, they will let us die violent deaths
Output not enough for all
Youngsters will simply refuse to work for low wages
Youngsters will simply refuse to work for low wages
Yeah....they'll demand $15/hr to work at Burger King.....good luck with that.
supply chains are breaking down right now
World trade is being reduced
World output is lower
Output is consumable, not money
Excellent point, globalism is not magic and when the ship is sinking it's every man for himself and damn the women and children.
"Youngsters will simply refuse to work for low wages"
After which their Chinese masters will pull out their fingernails & teeth with a pair of pliars.
Fook-a-me? Fook-a-yu!
Chinese current account surplus is just 2% or something now, as oppose 10% years ago
They are no longer exporting massively in exchange for electronic USD
Who will produce the output for elderly to consume?
Pretty sure that's you....are you going take on AARP all on your own?
Let us know how that works out for you.
The who?
Won't get fooled again.....turns out.....they did.
"Youngsters will simply refuse to work for low wages"
Already happened...
"Youngsters will simply refuse to work for low wages"
lol, tell that to the kids in thailand selling their bodies to Australian tourists in Phuket.
any asshole who margins up deserves to have his asshole handed to him.
fuck it, let the fur start flying. what would a life be without fear?
Either financial wipeout to extinguish multiple claims on real collateral, or world abandons USD, which would basically be the death of globalization and world trade
Blood will flood the streets and I'm speaking literally
Yours included i'm sure.
In the long run, ekm, the long run. The assumption by the state of the means of production is a long drawn out process, one industry or sector at a time, not an event. Think USSR.
This process could drag on for decades, even a century.
global trade won't go away, it'll just degrade to the 17th century....
It's all Bullshit!!!
"Plunge Protection Team Powers Activate!"
"Form of...... another round of QE!"
There, all fixed!
Most investors think that even if things go downhill fast that they will be smart enough to get out of the markets. After the debacle in 2008 where they saw the market do nasty and violent swings they learned a few things, this time they figure they will make the right moves before it is to late. But what if it hits like the flash crash on steroids?
For a long time I have been trying to develop a scenario for a market "super crash" and a reasonable map that would arrive at such a situation. Below you will find more on why this scenario could happen. We know that can't happen because circuit breakers have been put in place to arrest panic style moves, but imagine a market that falls, trade is halted, and the market simply does not reopen for days, or even weeks.
http://brucewilds.blogspot.com/2013/01/flash-crash-on-steroids.html
Stock market will MANUALLY be triggered to collapse. Circuit breakers will be disabled
I would only be slightly surprised if there is a physical switch, something like a light switch, on a wall or a desk somewhere.
The chain above the shitter?
What's actually funny is that it seems like nobody actually own shares anymore.
Or people are writing calls
Or people buy the options
so...
who actually owns the stock?
Not me, who wants to get caught with blood on their hands??
That is a jaw dropping mother fucker of a chart!
This scenario sounds a lot like the Crash of '29!
That is a jaw dropping mother fucker of a chart!
Geez Bruce!
Did I overreact? If so most sorry.
The chart blew me away because in highlights just how vulnerable we are. Many people have taken on far more risk than they think.
It's OK.....at least you finally said something I couldn't hear on CNBC.
It's nice to see you break out of your shell.....just be aware that CNN is gonna punk you for it.
There is no risk, only bullshit and fraud.
Nothing Yellen cannot paper over.
Your fear is totally misguided. Fascism already won.
That gets my vote. Folks behind the curtain will pull the strings...tight.
I contend the primary reason that inflation has not raised its ugly head or become a major economic issue is because we are pouring such a large percentage of wealth into intangible products or goods. If faith drops in these intangible "promises" and money suddenly flows into tangible goods seeking a safe haven inflation will soar. Like many of those who study the economy I worry about the massive debt being accumulated by governments and the rate that central banks have expanded the money supply.
The timetable on which economic events unfold is often quite uneven and this supports the possibility of an inflation scenario. A key issue being one of timing. If the price of gas jumps to $8 a gallon overnight do you buy gas and not make your car payment or stop driving the twenty miles to work? Answer, it could be months before your car is repossessed so you buy gas.
It is important to remember that debts can go unpaid and promises be left unfilled. If this happens where does it leave us? Chaos and major disruption would result from such a scenario. As we have seen from the economic crisis of 2008 and following many other unsettling developments legal actions can continue to drag on for years. More in the article below.
http://brucewilds.blogspot.com/2014/04/inflation-seed-of-economic-chaos....
There is no fat left in most people's wallets. One out of three Americans out for collection.
http://www.usatoday.com/story/money/personalfinance/2014/07/29/america-d...
This whole place is insane.
The Federal Reserve is bent on controlling all markets. No matter how distorted it becomes.
Their off-balance sheet garbage must be huge. Mark to fantasy, just like their member banks.
Who gives a shit about their off balance sheet. That's there printing machine that they appear to be honest about. If you want to control it, then you need to own it and when you need to own it you need to buy it. So they did. But they know it is getting bloated so they will make the free money from selling with the free money they bought it with and then let their members, which they own and control make money shorting it. Then they will call the bottom and start buying a again. Rinse and repeat for beginning of the ponzi affair.
WS message to CBs.............. DO NOT fuck with us.
http://www.youtube.com/watch?v=Ttaxup2BbSo
WS message to CBs.............. DO NOT fuck with us, until you pay us moar.
Fixed
They are trying to unicycle a tightrope at 50,000 metres
With bald tires and a frayed rope.
Another day like yesterday and the freaking out starts.
I think maybe so.
I am amazed that B of A has any customers left after all of the shenanigans they pull but then again Goldman still has customers.
Somebody out there can buy the market back up by sending credit 0s & 1s to a seller.
Pretty neat trick, huh? After all, everything we buy is just swapping IOU's to each other.
Most of us have to do something useful to somebody to get them. The lucky guys get to get them by pushing buttons.
That could go on much longer than most of us could believe.
I'm saving this article and filing it under "no shit."
Didn't Jon Corzine do the actual demonstration?
Meanwhile, GDP 4.6. When the Fed bumps that up to 7 or 8, it will likely start to let the air out.
Such is the way of Centrally Planned economic systems. They goal seek.
If they begin to sense a loss of control, the pentagon stands at the ready to break however many windows necessary to pump GDP to "desired" levels.
Syria? Just the beginning. A thousand smart bombs a day dropped on mud huts in obscure poverty stricken regions over seas would eventually put even Detroit's industrial production back on the map. Let alone pave the streets of Silicon Valley with gold.
Boeing moves to Chicago. Chicago boys move to DC. Coincidence?