Merrill Lynch

Margin Calls Mount On Loans Against Stock Portfolios Used To Buy Homes, Boats, "Pretty Much Everything"

 

"In a securities-based loan, the 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..." The result was "dangerously high margin balances,' - the products became “the vehicle of choice for investors looking to get cash for anything.” Mr. Sica and others say the products were aggressively marketed to investors by banks and brokerages.

 

MS Boosts TSLA Price Target To $465, Days After Underwriting Stock Offering; Sees Tesla Bigger Than Ford And GM

Moments ago, Morgan Stanley did it again just as expected, only this time it at least followed protocol when it announced it is raising its price target on TSLA from $280 to a whopping $465, or just shy of $61 billion in implied market cap. Incidentally at this price TSLA would be the biggest US automaker, surpassing not only GM's $50bn in market capo, but also Ford's $60 billion.

Yuan Devaluation Sparks Biggest Crash In US Corporate Bonds Since Lehman

Just two days ago we warned of the dramatic disconnect between equity insurance and credit insurance markets - at levels last seen before Bear Stearns collapse. As the Yuan devaluation shuddered EURCNH carry traders and battered European assets, US equity markets stumbled onwards and upwards, impregnable in their fortitude with The Fed at their back no matter what. However, US corporate bond markets were a bloodbath...

TSLA Confirms Cash Burn Fears, Sells $500 Million In Stock

Over the weekend, when looking carefully at Tesla's cash burn, pardon cash inferno we said that at "the current cash burn rate, TSLA can only fund just two more quarters of cash burn at which point, and most likely well before it, the company will have to aggressively raise new capital." It wasn't 1-2 quarters. It was barely 3 days. Moments ago TSLA announced that, just as we expected, it would dilute its shareholder by just under 2% by issuing $500 million in equity.

Frontrunning: August 4

  • Unhappy Voters Shake Up Presidential Race (WSJ)
  • China stock exchanges step up crackdown on short-selling (Reuters)
  • China Dethroned as World’s Most Liquid Stock Market After Curbs (BBG)
  • Xiaomi retakes the smartphone lead in China as Apple slips (Engadget)
  • Impact of EPA’s Emissions Rule on Industry to Vary (WSJ)
  • Citadel’s Ken Griffin Leaves 2008 Tumble Far Behind (WSJ)
  • Greece says expects bailout deal by Aug 18 (Reuters)

Trade Like A Market Wizard - An Interview With Mark Andrew Ritchie

"...risk management is not another component... it is THE component of trading! Everyone goes broke because their trading size is wrong... Any fool can take a profit. It takes a lot of character, discipline and commitment to take losses and continue going – and that is the only way one can succeed. The lasting trader will always reduce trading size in order to continue trading and come back."

Add Junk Bonds To The Growing Pile Of Concerns

Because of their credit issues, these bonds often trade more closely with equities than they do with base interest rates. Occasionally, however, junk bonds and stocks will diverge with one another. Such a divergence is occurring at the moment. It is often suggested that when the bond and stock markets diverge, the bonds typically prove to be correct, i.e., the stock market usually ends up going the way of the bonds. Is there evidence to back that up? According to our research there is, and with junk bond yields at s-x month highs while the S&P is within 1% of record highs, for stock bulls, that isn’t necessarily good news.

The Bush Family Goes "All In" For Number Three (With The Help Of Its Bankers)

It’s happening. As expected, dynastic politics is prevailing in campaign 2016. After a tease about as long as Hillary’s, Jeb Bush (aka Jeb!) officially announced his presidential bid last week. Ultimately, the two of them will fight it out for the White House, while the nation’s wealthiest influencers will back their ludicrously expensive gambit. And here’s a hint: don’t bet on Jeb not to make it through the Republican gauntlet of 12 candidates (so far). After all, the really big money’s behind him.

Jakobsen: Why Stocks Will Fall - "Consensus Is Wrong On US Rate Hikes"

Stock markets in the US and Europe are in for a correction, while the euro is set to rise, according to Saxo Bank’s Chief Economist Steen Jakobsen, nomatter what happens between Greece and its creditors. Steen also looks at the impact a rate hike from the US Federal Reserve would have on USD and what currencies could gain once the Fed decides to move on rates, noting that "the consensus has it wrong on the timing of US rate hike," as the credit cycle topped in June 2014. He believes that commodities and metals in particular offer opportunities for investors.

5 Things To Ponder: Shades Or Umbrella

Since the beginning of this year the markets have primarily treaded water. The primary support for the bulls has been continued acknowledgement by the Fed on an inability to remove accommodative policy by raising interest rates. (Which should make you question what happens the first time they do.) The bears have been feasting on weak economic data and deteriorating fundamentals.