Sunday, February 18, 2018

Buying on Margin suddenly became illegal in the U.S. out of the blue

History: Buying on Margin is one of the reasons the stock market crash in 1929 was so destructive and hwy so many people either killed themselves or died from starvation within a few years of the stock market Crash of 1929.

At that time the value of your stocks you could borrow against them (like owning a house) so with 10% of your stocks value you could borrow 100% against this to invest in the stock market.

If you have any business sense or knowledge of money you can see right off how dangerous (catastrophic) this could become.  (which it did in 1929).

When the stock market crashed the first 1000 points last week they ended margin buying atain to avoid a potential Great Depression II from happening now.

Even though now you couldn't have borrowed 100% against 10% of your stocks values you could still as of last week borrow up to 50% of your stocks values straight across. However, the SEC made even this illegal soon after the first 1000 point drop and ruined many people to many degrees nationwide and worldwdie by doing this. But, this likely was one of the things that avoided a 2nd Great Depression in the past 2 or 3 weeks time too.

Let's say you borrowed against 50% of your stocks 100,000 dollars and then you invested that money in something. Let's say you had a good income stream enough so all you had to do was to continue investing and live on the collected dividends.

Now imagine the SEC makes this illegal. What happens to you?

Your income stream just disappeared and not only that you have to liquidate 100,000 dollars of your investments to pay off the loan (And) you have to end your income stream you had coming to yourself from those investments too.

So, the SEC prevented another Great Depression (Partly) by doing this. But also ruined many investors strategic planning and may have bankrupted many in the process.


However, we are also not in another Great Depression right now with the market completely crashed no either, are we?

So, when the market crashed the 2nd 1000 points, all the margin calls had ended already which allowed the market not to go into a complete tailspin all the way down to 6500 to 6900 like it did in around 2008 or 2009.

So, by the SEC ending buying on margin and everyone paying their loans back (even if they were now bankrupt in the process) prevented a 2nd Great Depression the last few weeks.


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