The Brains Trust, page-5336

Interesting article attached on "shadow margin loans" in the US.

Each cycle seems to create new forms of debt, excessive risk or rorts and associated shysters that blow up when the turn comes. This bull market has been characterised by the rise of EFTs and passive investing as the new thing which I expect to become a negative drag on markets as those positions unwind in a correction.

But I thought margin loans were so last cycle as too many got burnt in 2007 for these to get another run. In Australia thats the case still I think, but in the US I've read articles stating that margin debt is quite high and so a risk for markets.

But I've never even heard of these other type of broker loans below, where shares are used for collateral for general purpose lending and all the banks are in on it in pushing them to clients. Just another huge source of risk that is not tracked by any regulator.

You can argue about timing, but when the next correction comes and all the passive investors withdraw, the margin loans trigger forced selling, these general loans trigger forced selling, and all the deriatives and the rest blow up, its going to be the mother of all corrections.

http://www.zerohedge.com/news/2017-...-ignore-ticking-time-bomb-shadow-margin-loans