JPMorgan Chase (NYSE: JPM) CEO Jamie Dimon is very clearly telling investors that they need to start worrying. In his company's second-quarter earnings release, he highlighted geopolitical tensions, inflation, fiscal deficits, and elevated ****** et prices as areas of concern. And, in an interview with CNBC, he noted that margin debt is at an all-time high. That last one could lead to a downward spiral that breaks the bull market. Here's what you need to know.
What's interesting in the list of concerns Jamie Dimon outlined in his company's second-quarter earnings is that ****** et prices are elevated despite the other negatives. Now, there is an old saying on Wall Street that the market climbs a wall of worry, so perhaps you could dismiss this situation. But when you add in record levels of margin debt to the equation, the story takes a very different turn.
Missed Nvidia in 2009? This Rare Signal Is Flashing Again. In 2009, a "Double Down" signal flashed for a little-known chipmaker called Nvidia. For the first time in years, that same "Total Conviction" signal is flashing for a company 1/100th the size of Nvidia. Continue »
Margin debt is a loan from a broker that is backed by an investor's portfolio. While the loan can be used for any purpose the investor would like (buying a car, for example), most use the money to buy additional investments. The loan risk isn't significant because it is backed by the portfolio. However, the broker will require the investor to maintain a certain amount of collateral to keep the loan open. This is where things get interesting.
Modest margin debt is unlikely to be a big issue. But if an investor uses margin loans aggressively, even a modest decline in stock prices could leave them with too little collateral. That would trigger a margin call, in which the broker demands additional collateral. The investor could just add cash to the account, but in most situations, the solution is to sell stocks. (If the investor doesn't provide additional collateral quickly enough, the broker will step in and sell stocks from the account.)
#investor #broker #prices #additional
What's interesting in the list of concerns Jamie Dimon outlined in his company's second-quarter earnings is that ****** et prices are elevated despite the other negatives. Now, there is an old saying on Wall Street that the market climbs a wall of worry, so perhaps you could dismiss this situation. But when you add in record levels of margin debt to the equation, the story takes a very different turn.
Missed Nvidia in 2009? This Rare Signal Is Flashing Again. In 2009, a "Double Down" signal flashed for a little-known chipmaker called Nvidia. For the first time in years, that same "Total Conviction" signal is flashing for a company 1/100th the size of Nvidia. Continue »
Margin debt is a loan from a broker that is backed by an investor's portfolio. While the loan can be used for any purpose the investor would like (buying a car, for example), most use the money to buy additional investments. The loan risk isn't significant because it is backed by the portfolio. However, the broker will require the investor to maintain a certain amount of collateral to keep the loan open. This is where things get interesting.
Modest margin debt is unlikely to be a big issue. But if an investor uses margin loans aggressively, even a modest decline in stock prices could leave them with too little collateral. That would trigger a margin call, in which the broker demands additional collateral. The investor could just add cash to the account, but in most situations, the solution is to sell stocks. (If the investor doesn't provide additional collateral quickly enough, the broker will step in and sell stocks from the account.)
#investor #broker #prices #additional
21 days ago
