Make your bet, when will stock market collapse?

[Siberian]

Let's create another example shall we?

Say for example I had a million dollars in my retirement portfolio but outside the normal tax structures of retirement portfolios. (Not that uncommon)

So I borrowed $500K and bought the limit of what I could of NVDIA or Apple stocks.

And depending on which I bought...I either tripled my money or doubled it this past year.
Even though I might have lost 5% these past two weeks I can settle that debt quite easily. I either have another million or half million dollars to pay interest (1%) fees and pocket the rest.
So...
Now that interest rates are climbing...
And risk is usually calculated between 3-9%and sometimes all the way out to 14% in addition for risk/reward investment calculations...those higher interest rates are also figured in for any borrowed money. Meaning that I am going to be more selective in what I invest in.
There's not going to be any margin call for the money I've borrowed. Provided that I've been prudent in what I invest in and that the lenders agree with my choices. They aren't going to complain or whine.
Now if I started off buying Micron when it was $90/share the first time last spring/summer...then they might have something to say when it dropped to 55/share...but with the current Market conditions they aren't going to say anything at all.

now, turning to your example.

You say - I can settle the debt.
But did you?
The growth we witnessed is made by partially QE money which go via banks to corporations which use it for buybacks or, in situation when inflation is accelerating, but accounts in the bank bring 1-2% (am I correct?) - there is no way for the people to save their money but to invest their savings in sonething which alone is still growing.
The stock market.
A giant bubble is created.
And imagine if even a small portion of these small investors decide to sell their stocks.

If the Fed really stops pumping 120 bln dollars a month of QE money into economy by March - there will be much less buybacks. If the market growth does not excede inflation - small investors will start leaving the market turning into gold or real estate. Stocks will first stagnate and ghen an avalanche of selling will follow.

Have you sold your shares?
You have not, so all your profit does not exist, it can and will evaporate because greed will make you wait if stocks dtop by 5%, then by 10%, then at 15% you will buy even more because "stocks always grow", and then at 21% drop it will become your personal financial catastrophe.

 

[JohnDB]

We'll definitely return to your example later, but I see you don't understand my point in my example, I have to explain it gurther.

I don't trade and don't have stocks, I am just interested in economy, so you may correct me in exact figures.

I presume collateral for a loan is usually about 80%, is it correct for the US?

It means that having stocks worth 100 mln dollars your limit of credit would be 80 mln.

You got it. But stocks fall by 20%. No, let it be even 5%. It means your collateral now is worth 76 mln and the bank comes to you with demand to either add some stocks worth 4 mln or pay the same sum in money.

If you got not 80 mln but let us say 60 mln - you proposed this sum - so, it means a credit worth 60 mln requires collateral worth 75 mln. You allocated 75 mln of your stocks as collateral.

Then, if stocks drop by 20%, then 75 mln f collateral turn into 60 mln, and if collateral must be 80% of price of stocks then your collateral is now worth 48 mln.
The margin is 12 mln.

25 mln of stocks now are worth 20 mln.If you usecthem as collateral they will be 20 mln x80% =16 mln.

Well, you will survive 20% drop, you wil still have about 5 mln of stocks not used as collateral.
Though, I forgot about the interest...

So, summing up, if you have stocks worth 100 mln and made a debt worth 60 mln maximum what you can afford yourself is 20% drop.
If more - you will go bankrupt.

The US stock market grew by e, 5 times since 2008, if I remember correctly.
It dropped by around 20% in autumn 2018, after the Fed started tightening, did it?

I mean you are all doomed in both ways.
If the Fed keeps printing money inflation will gradually turn into hyperinflation which will kill you.
If the Fed starts tightening the stock market will collapse creating a giant wave of margin calls as it was in 2008.

Very simple, there is no way out of current situation.

No... totally wrong.
You are not allowed to borrow so much.

Margin is 40% for most stocks.
Meaning that you can't borrow too much or else they have a margin call...where all assets and loans are made to balance. If you get out of balance they make a margin call and everything is monitored... open books are the norm here. The bank sees everything when you borrow money for any reason. And they like to collect. Not have defaults. They don't want to make margin calls. (Bad for business)

You can't borrow at the percentages you are claiming and most people don't push to the outer limits of their lines of credit. A few tried this past summer and those hedge funds got margin calls and dissolved. The others got appropriately chastised and warned and fixed their books. Even the Government can't go beyond what the Central Accounting Office says they have available for credit. And they got some fancy accounting.
My biggest beef currently is that the government seems to be using accounts receivable as an asset for purchasing debt. Private businesses are usually put in jail for such...but it's the government so there's not much we can do.

But there's also opposition political party that keeps the spending in check.

And considering the history of the Russian Government spending.... you got no room to talk. They are on their third? Currency since the fall of the Soviet Union which fell apart for exactly that very reason.

So we are stable for a long looooong time yet. We have the reserve deposit currency used by most of the world. It certainly isn't the Ruble.

 

[JohnDB]

now, turning to your example.

You say - I can settle the debt.
But did you?
The growth we witnessed is made by partially QE money which go via banks to corporations which use it for buybacks or, in situation when inflation is accelerating, but accounts in the bank bring 1-2% (am I correct?) - there is no way for the people to save their money but to invest their savings in sonething which alone is still growing.
The stock market.
A giant bubble is created.
And imagine if even a small portion of these small investors decide to sell their stocks.

If the Fed really stops pumping 120 bln dollars a month of QE money into economy by March - there will be much less buybacks. If the market growth does not excede inflation - small investors will start leaving the market turning into gold or real estate. Stocks will first stagnate and ghen an avalanche of selling will follow.

Have you sold your shares?
You have not, so all your profit does not exist, it can and will evaporate because greed will make you wait if stocks dtop by 5%, then by 10%, then at 15% you will buy even more because "stocks always grow", and then at 21% drop it will become your personal financial catastrophe.

Im actually sitting on cash at the moment.

I am not exactly sure of what is going to do well and which is not.
I'm also switching my retirement portfolio to one that is actively managed... my play account is all cash. Until I can find the signals I'm looking for I won't purchase. And previously I was in Coffee and oil and gold and lumber. But I'm sitting on cash at the moment.
And when I find a good place to land...I will.

 

[JohnDB]

now, turning to your example.

You say - I can settle the debt.
But did you?
The growth we witnessed is made by partially QE money which go via banks to corporations which use it for buybacks or, in situation when inflation is accelerating, but accounts in the bank bring 1-2% (am I correct?) - there is no way for the people to save their money but to invest their savings in sonething which alone is still growing.
The stock market.
A giant bubble is created.
And imagine if even a small portion of these small investors decide to sell their stocks.

If the Fed really stops pumping 120 bln dollars a month of QE money into economy by March - there will be much less buybacks. If the market growth does not excede inflation - small investors will start leaving the market turning into gold or real estate. Stocks will first stagnate and ghen an avalanche of selling will follow.

Have you sold your shares?
You have not, so all your profit does not exist, it can and will evaporate because greed will make you wait if stocks dtop by 5%, then by 10%, then at 15% you will buy even more because "stocks always grow", and then at 21% drop it will become your personal financial catastrophe.

And the Fed pumps money into the market by selling cheap bonds and lowering the prime lending rate.

They don't just get out a pump and connect it to a magic vault. ROFL...
You got some really warped ideas.

 

[Siberian]

No... totally wrong.
You are not allowed to borrow so much.

Margin is 40% for most stocks.
Meaning that you can't borrow too much or else they have a margin call...where all assets and loans are made to balance. If you get out of balance they make a margin call and everything is monitored... open books are the norm here. The bank sees everything when you borrow money for any reason. And they like to collect. Not have defaults. They don't want to make margin calls. (Bad for business)

You can't borrow at the percentages you are claiming and most people don't push to the outer limits of their lines of credit. A few tried this past summer and those hedge funds got margin calls and dissolved. The others got appropriately chastised and warned and fixed their books. Even the Government can't go beyond what the Central Accounting Office says they have available for credit. And they got some fancy accounting.
My biggest beef currently is that the government seems to be using accounts receivable as an asset for purchasing debt. Private businesses are usually put in jail for such...but it's the government so there's not much we can do.

But there's also opposition political party that keeps the spending in check.

And considering the history of the Russian Government spending.... you got no room to talk. They are on their third? Currency since the fall of the Soviet Union which fell apart for exactly that very reason.

So we are stable for a long looooong time yet. We have the reserve deposit currency used by most of the world. It certainly isn't the Ruble.

40% or 80% does not really matter for you, the bank will come to you after the same 20% of fall.
It is tge bank, not you who benefits from lowering margin level to 40%, because it ensures that the bank will not lose money even if the fall is 30%. But for you it just decreases the sum you can borrow.

You should be better informed.
The, US looks as an absolute Zimbabwe compared to present Russia.
Public debt is 17% of GDP in Russia and 128% in the US.
US budget deficite is astronomical 14,9%, while in Russia in covid 2020 it was 3,8%, while for other 15 or so years we had budget surplus.
We have positive foreign trade and curfent account balabces.
The US have negative foreign trade and current account balances.

Additionally, all this carnival of yours depends solely on Dollar being the World trade currency and supsequent ability if the Fed to print money to finance your debt.
But is is going to end in a couple of years as Yuan substitutes Dollar as the World currency.

Recall what I said about only 2 options the Fed has - to pring into hyperinflation or taper into stock market collapse.

 

[Siberian]

And the Fed pumps money into the market by selling cheap bonds and lowering the prime lending rate.

They don't just get out a pump and connect it to a magic vault. ROFL...
You got some really warped ideas.

you may have heard already the Fed promised to stop pumping money into the market by March and then to start raising the interest rate
Of course it is just promises, I think after a dive by ~15-20% they will resume QE in triple volume, but it will accelerate inflation even more...

 

[JohnDB]

40% or 80% does not really matter for you, the bank will come to you after the same 20% of fall.
It is tge bank, not you who benefits from lowering margin level to 40%, because it ensures that the bank will not lose money even if the fall is 30%. But for you it just decreases the sum you can borrow.

You should be better informed.
The, US looks as an absolute Zimbabwe compared to present Russia.
Public debt is 17% of GDP in Russia and 128% in the US.
US budget deficite is astronomical 14,9%, while in Russia in covid 2020 it was 3,8%, while for other 15 or so years we had budget surplus.
We have positive foreign trade and curfent account balabces.
The US have negative foreign trade and current account balances.

Additionally, all this carnival of yours depends solely on Dollar being the World trade currency and supsequent ability if the Fed to print money to finance your debt.
But is is going to end in a couple of years as Yuan substitutes Dollar as the World currency.

Recall what I said about only 2 options the Fed has - to pring into hyperinflation or taper into stock market collapse.

Like I said...
Very large funds went under this past summer and their stocks were sold... dumped actually...not in the usual drip that lasts for months...but dumped. I got caught in that dumping as I held some of the same stocks. So I held tight and came out just fine.

It's called underwriting....we have extremely strict guidelines for underwriting. So what you propose is not a possibility. You are an idiot.

 

[JohnDB]

you may have heard already the Fed promised to stop pumping money into the market by March and then to start raising the interest rate
Of course it is just promises, I think after a dive by ~15-20% they will resume QE in triple volume, but it will accelerate inflation even more...

And guess who is going to buy that debt?

YOU by means of Russia. (Probably not)

But there will be some sales of bonds abroad in exchange for stuff. That's usually Biden's "go to" for backhanded stimulus and it won't hit the inflation meter so hard. Japan will buy some...so will the Saudis. Taiwan likely will as well.

Europe? They are already up to their eyeballs in debt from their own borrowing and the disaster Greece made happen.

 

[Siberian]

Like I said...
Very large funds went under this past summer and their stocks were sold... dumped actually...not in the usual drip that lasts for months...but dumped. I got caught in that dumping as I held some of the same stocks. So I held tight and came out just fine.

It's called underwriting....we have extremely strict guidelines for underwriting. So what you propose is not a possibility. You are an idiot.

John, calling names is affordable for an American redneck like you, but for the rest - just when you go bankrupt in next stock market collapse, let the fact that you were forewarned make your bankruptcy even more bitter
I think I am not going to go another round of explaining the same

 

[JohnDB]

John, calling names is affordable for an American redneck like you, but for the rest - just when you go bankrupt in next stock market collapse, let the fact that you were forewarned make your bankruptcy even more bitter
I think I am not going to go another round of explaining the same

Well all your figures are wrong...your percentages way off. And you ignore pertinent information.

I ain't even a redneck...just a wannabe.

Whatcha gonna do when Russia issues yet another new currency and you can't pay the rent on your cardboard box?

 

[Siberian]

And guess who is going to buy that debt?

YOU by means of Russia. (Probably not)

But there will be some sales of bonds abroad in exchange for stuff. That's usually Biden's "go to" for backhanded stimulus and it won't hit the inflation meter so hard. Japan will buy some...so will the Saudis. Taiwan likely will as well.

Europe? They are already up to their eyeballs in debt from their own borrowing and the disaster Greece made happen.

not Russia, we reduced our holding of US treasury notes to marginal digits, some sort of a couple of billions of about half a trilion of Russian reserves

Of course some US puppets will buy some debt, but inflation accelerates worldwide and one puppet after another will fall out, starting from the most vulnerable like Turkey or Egypt etc.

you seem not to understand the core problem of the West.

YOUR ECONOMY DOES NOT CREATE PROFIT.
The only place where some virtual profit is made is the stock market which grows thanks to QE only.

This deeply flawed system is a zombie and is going to collapse soon.

 

[Siberian]

Well all your figures are wrong...your percentages way off. And you ignore pertinent information.

I ain't even a redneck...just a wannabe.

Whatcha gonna do when Russia issues yet another new currency and you can't pay the rent on your cardboard box?

my figures are not wrong, they are abstract, to demonstrate the principle.
You can recalculate everything yourself using your figures to find out that the same 20% drop is lethal for you.

 

[JohnDB]

not Russia, we reduced our holding of US treasury notes to marginal digits, some sort of a couple of billions of about half a trilion of Russian reserves

Of course some US puppets will buy some debt, but inflation accelerates worldwide and one puppet after another will fall out, starting from the most vulnerable like Turkey or Egypt etc.

you seem not to understand the core problem of the West.

YOUR ECONOMY DOES NOT CREATE PROFIT.
The only place where some virtual profit is made is the stock market which grows thanks to QE only.

This deeply flawed system is a zombie and is going to collapse soon.

Totally missed the function of our economy.

We profit from all our investments in other nations. It's why Biden wants an international tax on corporations that don't pay much taxes in America.

I can buy Micron, an American corp. But it's facilities and offices are in over 20 different countries. They don't just make and sell memory chips in America.

Unless the whole world collapses they aren't going to go out of business...or be so cash strapped that they stop paying dividends.

 

[Siberian]

Totally missed the function of our economy.

We profit from all our investments in other nations. It's why Biden wants an international tax on corporations that don't pay much taxes in America.

I can buy Micron, an American corp. But it's facilities and offices are in over 20 different countries. They don't just make and sell memory chips in America.

Unless the whole world collapses they aren't going to go out of business...or be so cash strapped that they stop paying dividends.

indeed, the US benefits much from activity abroad.

but what was the core process in the World economy between 2008 and now?

by 2008 the Western economy got overdebted and came to the brink of collapse due to lack of solvency.

but the Fed started QE, it kept Western economy afloat sumultaneously sucking solvency from the rest of the World.

low interest rate created carry trade, US banks were crediting 3d countries' banks which were crediting local business and consumers.

By now the rest of the World fast forwarded to the same condition to which the West came by 2008 - overdebtedness.
Now every Ethiopian peasant has a debt he cannot pay.

And of course the US will be the last to fall if the World collapse starts right now, first these small nations will fall, whose currency does not allow to QE without immediate hyperinflation.

But it is a weak relief for the US, it just postpones the collapse of the US, but it is still a collapse of US-centered World economic system.
In which collapse of the US will come in its term. very soon, a couple of years.

 

[JohnDB]

indeed, the US benefits much from activity abroad.

but what was the core process in the World economy between 2008 and now?

by 2008 the Western economy got overdebted and came to the brink of collapse due to lack of solvency.

but the Fed started QE, it kept Western economy afloat sumultaneously sucking solvency from the rest of the World.

low interest rate created carry trade, US banks were crediting 3d countries' banks which were crediting local business and consumers.

By now the rest of the World fast forwarded to the same condition to which the West came by 2008 - overdebtedness.
Now every Ethiopian peasant has a debt he cannot pay.

And of course the US will be the last to fall if the World collapse starts right now, first these small nations will fall, whose currency does not allow to QE without immediate hyperinflation.

But it is a weak relief for the US, it just postpones the collapse of the US, but it is still a collapse of US-centered World economic system.
In which collapse of the US will come in its term. very soon, a couple of years.

You and the QE.

The market is in correction as I accurately predicted for this month. Capital flight from other countries is heading straight to America. (Assisting in inflation) and soon Biden will be backdoor ING some bonds abroad.

No QE issues. No capital issues. No solvency issues. The highest standard of living in the world is still secure and Russia is still pissed off about it and isn't much more than a drunken paper tiger.

 

[Siberian]

You and the QE.

The market is in correction as I accurately predicted for this month. Capital flight from other countries is heading straight to America. (Assisting in inflation) and soon Biden will be backdoor ING some bonds abroad.

No QE issues. No capital issues. No solvency issues. The highest standard of living in the world is still secure and Russia is still pissed off about it and isn't much more than a drunken paper tiger.

John, you are a living example how QE keeps inefficient US economy afloat.

Because with so weird and wrong perception of economy like yours one would have gone bankrupt long ago without QE.

US capital flows stay within average levels, it means there is no special increase to create change in anything, including inflation. It is a false narrative. And your being delusional.

make 10 years in the table

 

[Siberian]

but what really accelerates global inflation is US growing current account deficite, which means that the Fed prints more (uncovered with goods) money to finance your deficite in trade., creates extra demand without creating proper supply of good.

United States Current Account - 2023 Data - 2024 Forecast - 1960-2022 Historical

The US recorded a current account gap of $219.3 billion in Q1 2023, higher than an upwardly revised $216.2 billion in Q4 2022 and forecasts of a $217.5 billion deficit. It is equivalent to 3.3% of the current-dollar GDP. The secondary income gap increased to $49.6 billion from $40.7 billion, as...

tradingeconomics.com

 

[JohnDB]

but what really accelerates global inflation is US growing current account deficite, which means that the Fed prints more (uncovered with goods) money to finance your deficite in trade., creates extra demand without creating proper supply of good.

United States Current Account - 2023 Data - 2024 Forecast - 1960-2022 Historical

The US recorded a current account gap of $219.3 billion in Q1 2023, higher than an upwardly revised $216.2 billion in Q4 2022 and forecasts of a $217.5 billion deficit. It is equivalent to 3.3% of the current-dollar GDP. The secondary income gap increased to $49.6 billion from $40.7 billion, as...

tradingeconomics.com

So...the WHOLE WORLD is going to financially collapse?

Now who's delusional?

 

[Siberian]

So...the WHOLE WORLD is going to financially collapse?

Now who's delusional?

exactly, the whole World. Since after collapse of the USSR the American financial system has expanded to the whole World.
Rather it's a delusion to state the opposite..

it is going to be the biggest economic collapse/crises in human History.

 

[JohnDB]

exactly, the whole World. Since after collapse of the USSR the American financial system has expanded to the whole World.
Rather it's a delusion to state the opposite..

it is going to be the biggest economic collapse/crises in human History.

So...better to go out as a big glowing ball from radiation eh?

End of the world as we know it?

Not happening.