Mark McHugh

BRRRIINNG…..Margin Calling

In Open Thread on Monday, February 23, 2009 at 10:14 pm

As far as I know, there is no accurate data available to the public about margin calls (please correct me if I’m wrong).  We have to guess.  My guess is that there are still a whole lot of people out there playing with fire margin.  Those trying to make up losses by doubling down.  So far the YTD chart is ugly, to say the least:

ytd1

from Yahoo

more…………………………..


My spider-sense tells me that there may be a whole lot of margin calls going out right now, so as ugly as things are, they’re going to get worse.  The forced selling pressure that margin calls create is one more reason I don’t like gold right now.  I really think that long-stocks, long-gold was an overplayed trade the past couple months.  When margin calls go out, you’ve either got to come up with more cash, close positions or they’ll be closed for you (at your broker’s discretion).  I believe that there are some people who will be forced to gold close positions.

It can happen to smart guys too……

CNBC’s Charlie Gasparino reported this last week:

Goldman Sachs Partners Borrow to Cover Margin Calls

Normally, I rejoice unpleasant things happening to Goldman, but this one scares me.  These are the people who should know what’s going on, and don’t get caught leaning the wrong way.  I hope this is a rumor, because if it’s not, we are probably in for another very nasty leg down.

Quick note:  My work schedule is going to be very rough the next few weeks, so forgive me if  updates are infrequent and comments don’t post right away.

  1. […] not forget margin calls (discussed previously) either.  About the only positive I can give you is that, at a glance, the options market looks […]

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