Gold – the final bubble, page-4203

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

Submitted by Tyler Durden on 08/27/2015 15:40 -0400

Submitted by Mike Krieger via Liberty Blitzkrieg blog,

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,” said Jeff Sica, president at Morristown, N.J.-based Circle Squared Alternative Investments, which oversees $1.5 billion of mostly alternative investments. He said 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.

From the Wall Street Journal article: Margin Calls Bite Investors, Banks
Today’s article from the Wall Street Journal on investors taking out large loans backed by portfolios of stocks and bonds is one of the most concerning and troubling finance/economics related articles I have read all year.
Many of you will already be aware of this practice, but many of you will not. In a nutshell, brokers are permitting investors to 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.

At http://www.zerohedge.com/news/2015-...portfolios-used-buy-homes-boats-pretty-much-e As Jim Sinclair added at http://www.jsmineset.com/2015/08/27/in-the-news-today-2285/

"There goes the boat, the house, our first born and my mother in law. How do you think we had so much money in the stock market?"