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Possible Warning re: financial downslide?

 
Financial Trader
User ID: 1008701
United States
06/19/2010 04:26 PM
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Possible Warning re: financial downslide?
I have been a successful trader for over 20 years.

This week, I received notification from two major brokerage houses that I do business with noting the following:

"Margin requirements will be reduced from $25k to $5k effective June 23, 2010"

As a trader, reducing margin requirements sends MAJOR ALARMING BELLS.

My take: a MAJOR slide is coming ... SOON!
Anonymous Coward
User ID: 254879
United States
06/19/2010 04:29 PM
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Re: Possible Warning re: financial downslide?
reduced???
Anonymous Coward
User ID: 982910
United States
06/19/2010 04:30 PM
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Re: Possible Warning re: financial downslide?
OP, can you play this out a bit more for those of us who are effectively financial idiots?

Like, what does it mean when margin requirements are reduced by 80%? Why is this bad? I'm not stupid, I'm just not a financially savvy person, so please thumbnail it for us. Thanks.
BadMoonRising

User ID: 727864
United Kingdom
06/19/2010 04:32 PM
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Re: Possible Warning re: financial downslide?
sherlock

The whole world is bankrupt.
"What The HELL Is Going On?..."

[link to www.worldending2012.org]
Anonymous Coward
User ID: 1007296
United States
06/19/2010 04:33 PM
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Re: Possible Warning re: financial downslide?
Thanks for the heads-up OP. Any truth to the idea that traders don't own stock?
Thread: HAHA!!! Wallstreet traders don't own any stocks!! Shocking huh
Anonymous Coward
User ID: 1006753
United States
06/19/2010 04:34 PM
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Re: Possible Warning re: financial downslide?
OP, can you play this out a bit more for those of us who are effectively financial idiots?

Like, what does it mean when margin requirements are reduced by 80%? Why is this bad? I'm not stupid, I'm just not a financially savvy person, so please thumbnail it for us. Thanks.
 Quoting: Anonymous Coward 982910



Yeah. What s/he said!
Financial Trader (OP)
User ID: 1008701
United States
06/19/2010 04:42 PM
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Re: Possible Warning re: financial downslide?
As a followup ...

Margin is leverage. For example one can purchase a stock for lets say $50. and depending on your qualifications, can borrow against that position allowing you to add more stock for the same price.

Margin requirements have been minimum of $25k since I got started over 20 years now.

By reducing it so drastically, it says to me...

They must know that in the near future, MOST of their client will not be able to have $25K minimums ... hence lowering it.

Which is also regulated by the SEC ... so this is NOT something done by each individual brokerage house.

Also, pay attention to the date ... June 23, 2010.

Take it for what its worth, just passing on some information in light of the economic turmoil we find ourselves in.
Anonymous Coward
User ID: 982910
United States
06/19/2010 04:46 PM
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Re: Possible Warning re: financial downslide?
As a followup ...

Margin is leverage. For example one can purchase a stock for lets say $50. and depending on your qualifications, can borrow against that position allowing you to add more stock for the same price.

Margin requirements have been minimum of $25k since I got started over 20 years now.

By reducing it so drastically, it says to me...

They must know that in the near future, MOST of their client will not be able to have $25K minimums ... hence lowering it.

Which is also regulated by the SEC ... so this is NOT something done by each individual brokerage house.

Also, pay attention to the date ... June 23, 2010.

Take it for what its worth, just passing on some information in light of the economic turmoil we find ourselves in.
 Quoting: Financial Trader 1008701


Awesome! Okay, bear with me for another second because I smoked too much dope in my youth, k?

You're saying that after the 23rd, one will be able to buy (on margin) a stock for $5 that before would have cost $25?

Do I have it right yet? Thanks - I'm honestly not baiting you - I want to have a clear understanding.

hf
Financial Trader (OP)
User ID: 1008701
United States
06/19/2010 04:52 PM
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Re: Possible Warning re: financial downslide?
NO.

80% margin reduction means simply this.

In the past, in order to business on margin at any major borkerage, you must maintain a MINIMUM equity position (cash on hand) for $25k.

This has been in effect since I became a trader.

Again, margin is leverage (nothing more, nothing less).

NOW ... they have changed it and notified us that...

Effective June 23, 2010, we only need to have $5k equity position (cash on hand).

If u know anything about investment, this is NOTHING (investment wise).

It suggest that the reason they are lowering it is that they expect most people will not be able to afford the higher requirement in the not so distance future.
Anonymous Coward
User ID: 982910
United States
06/19/2010 04:55 PM
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Re: Possible Warning re: financial downslide?
NO.

80% margin reduction means simply this.

In the past, in order to business on margin at any major borkerage, you must maintain a MINIMUM equity position (cash on hand) for $25k.

This has been in effect since I became a trader.

Again, margin is leverage (nothing more, nothing less).

NOW ... they have changed it and notified us that...

Effective June 23, 2010, we only need to have $5k equity position (cash on hand).

If u know anything about investment, this is NOTHING (investment wise).

It suggest that the reason they are lowering it is that they expect most people will not be able to afford the higher requirement in the not so distance future.
 Quoting: Financial Trader 1008701


Ahhhh okay it's sinking in. Yes, sounds like they're really wanting to keep the market moving - or are anticipating that there will be a need to lower the bar to retain trader participation.
Anonymous Coward
User ID: 879039
United States
06/19/2010 04:57 PM
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Re: Possible Warning re: financial downslide?
NO.

80% margin reduction means simply this.

In the past, in order to business on margin at any major borkerage, you must maintain a MINIMUM equity position (cash on hand) for $25k.

This has been in effect since I became a trader.

Again, margin is leverage (nothing more, nothing less).

NOW ... they have changed it and notified us that...

Effective June 23, 2010, we only need to have $5k equity position (cash on hand).

If u know anything about investment, this is NOTHING (investment wise).

It suggest that the reason they are lowering it is that they expect most people will not be able to afford the higher requirement in the not so distance future.
 Quoting: Financial Trader 1008701



Hey OP, Would this start panic in the markets and sell off?
This tells me to get out before the 23.
Huge red flag.


Ideas?
Anonymous Coward
User ID: 879039
United States
06/19/2010 04:57 PM
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Re: Possible Warning re: financial downslide?
NO.

80% margin reduction means simply this.

In the past, in order to business on margin at any major borkerage, you must maintain a MINIMUM equity position (cash on hand) for $25k.

This has been in effect since I became a trader.

Again, margin is leverage (nothing more, nothing less).

NOW ... they have changed it and notified us that...

Effective June 23, 2010, we only need to have $5k equity position (cash on hand).

If u know anything about investment, this is NOTHING (investment wise).

It suggest that the reason they are lowering it is that they expect most people will not be able to afford the higher requirement in the not so distance future.


Ahhhh okay it's sinking in. Yes, sounds like they're really wanting to keep the market moving - or are anticipating that there will be a need to lower the bar to retain trader participation.
 Quoting: Anonymous Coward 982910


This will slow the market down.
Anonymous Coward
User ID: 982910
United States
06/19/2010 04:59 PM
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Re: Possible Warning re: financial downslide?
This will slow the market down.
 Quoting: Anonymous Coward 879039


Why? Wouldn't it make it easier for traders to get involved?
Anonymous Coward
User ID: 254879
United States
06/19/2010 04:59 PM
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Re: Possible Warning re: financial downslide?
As a followup ...

Margin is leverage. For example one can purchase a stock for lets say $50. and depending on your qualifications, can borrow against that position allowing you to add more stock for the same price.

Margin requirements have been minimum of $25k since I got started over 20 years now.

By reducing it so drastically, it says to me...

They must know that in the near future, MOST of their client will not be able to have $25K minimums ... hence lowering it.

Which is also regulated by the SEC ... so this is NOT something done by each individual brokerage house.

Also, pay attention to the date ... June 23, 2010.

Take it for what its worth, just passing on some information in light of the economic turmoil we find ourselves in.
 Quoting: Financial Trader 1008701

Look at it as a reduction of your credit limit on your credit card
Anonymous Coward
User ID: 254879
United States
06/19/2010 05:00 PM
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Re: Possible Warning re: financial downslide?
you have less to spend...you have less to buy...stocks might dump
Financial Trader (OP)
User ID: 1008701
United States
06/19/2010 05:04 PM
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Re: Possible Warning re: financial downslide?
Don't give advice, but I would remain cautious holding any paper positions overnight over this whole summer. As everyone knows (or should know), the stock market is a giant scam and all signs point to it getting taken apart soon.

Remember, I am a TRADER, not INVESTOR.

BIG difference, my investment is in RE and gold, my play money is traded.

Take it for what its worth.
Anonymous Coward
User ID: 982910
United States
06/19/2010 05:07 PM
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Re: Possible Warning re: financial downslide?
Don't give advice, but I would remain cautious holding any paper positions overnight over this whole summer.
 Quoting: Financial Trader 1008701


I had stock in Dunder Mifflin Paper, Inc., but I sold it all. Now the only paper I hold is Three Ring Notebook Paper.
Anonymous Coward
User ID: 1008713
United States
06/19/2010 05:10 PM
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Re: Possible Warning re: financial downslide?
I would have thought Margin requirements would be a percentage of debt to equity? Oh, well.
Anonymous Coward
User ID: 645607
United States
06/19/2010 05:10 PM
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Re: Possible Warning re: financial downslide?
obama will save us 5a
ºPEEº

User ID: 1000973
United States
06/19/2010 05:14 PM
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Re: Possible Warning re: financial downslide?
what brings you to GLP?
Anonymous Coward
User ID: 952140
United States
06/19/2010 05:15 PM
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Re: Possible Warning re: financial downslide?
So in other words easy credit (so to speak) which precipitated the credit crisis we currently find ourselves in, is now being extended to traders?
Anonymous Coward
User ID: 898033
United States
06/19/2010 05:17 PM
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Re: Possible Warning re: financial downslide?
a lot of things are pointing to July as being extremely risky for all things financial.
Anonymous Coward
User ID: 441464
Canada
06/19/2010 05:18 PM
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Re: Possible Warning re: financial downslide?
OP as a trader, do you have any opinion on the following website...

www.tickerforum.org

...Karl is a deflationist which I feel is what is happening at present...deflation.

Any ideas on how the S&P plays out over the next 6 months?
Anonymous Coward
User ID: 985869
Netherlands
06/19/2010 05:20 PM
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Re: Possible Warning re: financial downslide?
And I always thought that a lower margin would mean less risk in the market ;)
Dread Pirate Roberts

User ID: 1005020
United States
06/19/2010 05:21 PM
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Re: Possible Warning re: financial downslide?
Info about margin requirements:

"In the year and a half since Lehman Brothers failed, we have heard a chorus of urgent calls for new regulations to prevent a repeat of the financial meltdown of 2008. Despite many proposals, however, no new regulations have gained traction toward enactment into law. These proposed reforms have included requiring additional fees for banks, restricting the size and scope of banks, separating banks' depository functions and trading activities, and stripping the Federal Reserve of its authority over banks and creating new regulatory institutions to oversee them. Yet, the Fed complains that it needs additional policy tools to manage the economy."

"There is a simple, time-tested solution that would prevent a repeat of the recent financial crisis — a margin requirement for over-the-counter transactions (private transactions between banks or other parties)."

"In the aftermath of the 1929 stock market crash, the margin requirement for stock ownership (the amount that an investor must deposit in a margin account before buying on margin or selling short) was raised from 10 percent to 50 percent. This simple requirement has served us well for the past 80 years and has controlled excessive risk-taking in the stock market by individuals. Unfortunately, the margin requirement applies only to the stock market and exchange-traded products. There have been no margin requirements for over-the-counter transactions, where the bulk of trading takes place."

[link to www.bus.umich.edu]

-----------------------

More at link. 80% rule. The article was published in March 2010.

so that's some background for you
"From that time Jesus began to preach and say, "Repent, for the kingdom of heaven is at hand." Matthew 4:17
Anonymous Coward
User ID: 1008738
United States
06/19/2010 05:22 PM
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Re: Possible Warning re: financial downslide?
Is this where it came from?

[link to www.google.com]


Looks like they are getting desperate for the smaller investor to enter the market. I guess the big trading computers got lonely batting those stocks back and forth.
FreedomSheep

User ID: 1008534
France
06/19/2010 05:24 PM
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Re: Possible Warning re: financial downslide?
I was a freelance trader for 10 years, and what i see on the DOW chart is what is commonly called in the trading community as an "Head and shoulders" pattern, i identified that pattern quite a long time ago, while the last shoulder was starting to be drawn by the market, i give 18 months max before a major collapse of the DOW, it's heading back to the level it was when the first shoulder pattern started, IMHO.

Link to the chart :

[link to ichart.finance.yahoo.com]
TraderRob

User ID: 1003564
United States
06/19/2010 05:25 PM

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Re: Possible Warning re: financial downslide?
I have been a successful trader for over 20 years.

This week, I received notification from two major brokerage houses that I do business with noting the following:

"Margin requirements will be reduced from $25k to $5k effective June 23, 2010"

As a trader, reducing margin requirements sends MAJOR ALARMING BELLS.

My take: a MAJOR slide is coming ... SOON!
 Quoting: Financial Trader 1008701


MMMM... I am in the same business and don't see it the same way. A lot of brokers that catered to the traders with more assets to trade are now going after the smaller cap traders.

They are using commercial off the shelf trading platforms like MetaTrader that cost them very little to set-up (client for the trader is free).

They are also acting as the bank -- instead of as a broker. This means when someone buys or sells a lot on the FOREX market, and in many cases metals and indexes, the broker does not go out to the market and actually exchange money. They bet against you instead of completing teh exchange with the bank because they know that 80% of the low cap traders lose all of their money in a short time. They might as well keep it instead of letting the banks make the money.
Anonymous Coward
User ID: 961245
United States
06/19/2010 05:26 PM
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Re: Possible Warning re: financial downslide?
As a followup ...

Margin is leverage. For example one can purchase a stock for lets say $50. and depending on your qualifications, can borrow against that position allowing you to add more stock for the same price.

Margin requirements have been minimum of $25k since I got started over 20 years now.

By reducing it so drastically, it says to me...

They must know that in the near future, MOST of their client will not be able to have $25K minimums ... hence lowering it.

Which is also regulated by the SEC ... so this is NOT something done by each individual brokerage house.

Also, pay attention to the date ... June 23, 2010.

Take it for what its worth, just passing on some information in light of the economic turmoil we find ourselves in.
 Quoting: Financial Trader 1008701



FUCK!!
Anonymous Coward
User ID: 905984
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06/19/2010 05:29 PM
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Re: Possible Warning re: financial downslide?
OP here's a question for you.. you trade bank instruments such as SBLC, MTN, CDs? I have a colleague that says he purchased an MTN from Credit Suisse, now claiming that CS is not releasing funds ( Euro's) we think he is full of baloney.. have you heard this happening? He said that Euro banks not releasing funds because of Greece?
Anonymous Coward
User ID: 983460
United States
06/19/2010 05:30 PM
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Re: Possible Warning re: financial downslide?
As a followup ...

Margin is leverage. For example one can purchase a stock for lets say $50. and depending on your qualifications, can borrow against that position allowing you to add more stock for the same price.

Margin requirements have been minimum of $25k since I got started over 20 years now.

By reducing it so drastically, it says to me...

They must know that in the near future, MOST of their client will not be able to have $25K minimums ... hence lowering it.

Which is also regulated by the SEC ... so this is NOT something done by each individual brokerage house.

Also, pay attention to the date ... June 23, 2010.

Take it for what its worth, just passing on some information in light of the economic turmoil we find ourselves in.
 Quoting: Financial Trader 1008701


Maybe THIS is OPERATION BLACKJACK *all along*? And not some nukes hitting cities all over the world?