vincecate wrote:
> Just last week Etrade would have let me buy 4 times as much stock
> as I have money. Today they have set it to 1 times. No margin at
> all. My account is much bigger now, as I have a lot of S&P puts
> that have been doing really well this year, and there is also more
> cash, so I don't think it is in any way specific to my account but
> I have no data about any other accounts. If brokers dial back the
> leverage they are willing to extend margin traders (not that I am
> one), this can trigger/exacerbate a crash.
> I would be curious if anyone else can report what margin their
> brokers would let them have at this time and if that has changed
> recently. Typically when "downside volatility" increases brokers
> allow less margin. We have had some of that this year, so I think
> tighter limits are to be expected.
> Also, I predicted this would happen, but I expected them to go
> from 4 to 2, not 1. Buckle up.
DoubleLine's Gundlach: Stock, credit declines suggest margin calls
NEW YORK | By Jennifer Ablan
Personal Finance | Wed Jan 20, 2016 4:21pm EST
Jeffrey Gundlach, co-founder and chief executive of DoubleLine
Capital, said on Wednesday that the major declines in equity and
credit markets could suggest that "margin calls are going on."
In a telephone interview, Gundlach said he did not expect the
high-yield junk bond market to bottom out unless the volatility index
rises over 40. "This is not stopping any time soon," Gundlach
said. The CBOE Volatility Index was up more than 17 percent mid-day
Wednesday to 30.56.
"This is a liquidation cycle. All of these things that were so loved
are being sold. We have a 'sell the winners mentality'," Gundlach
said. "Today's action has all the trappings of a liquidation sale."
Wall Street moved deep into the red in volatile trading, extending
this year's selloff as oil prices continued to plummet.
Gundlach explained that tumbling oil prices are a symptom of central
bankers' zero interest-rate policies.
"Oil is in massive oversupply due to ZIRP (zero interest-rate policy)
induced over-investment," he said. "And crashing oil is not the cause
of all this chaos, it is a symptom of global economic weakness. As are
all the tumbling risk markets. We have insufficient and dwindling
global growth."
The rout was across the board: all 30 Dow components and all 10 major
S&P sectors were in the red, with five down more than 3 percent. The
small-cap Russell 2000 index fell 2.7 percent. The New York Stock
Exchange recorded 1,314 stocks hitting new 52-week lows, while 809
sank to new lows on the Nasdaq, the most on a single day since Aug. 24
for both exchanges.
Gundlach, who had repeatedly warned that the Fed prematurely raised
rates in December, said: "The market is going to humiliate the Fed."
Gundlach said Fed officials need to soften their rhetoric on hiking
rates further. He said he does not think the Fed will be able to raise
interest rates eight times over the next two years, as reflected in
its 'dot plot.'
Federal Reserve officials publish their forecasts for the central
bank's key interest rate on a chart known as the dot plot.
Last year, Gundlach correctly predicted that oil prices would plunge,
junk bonds would live up to their name and China's slowing economy
would pressure emerging markets. In 2014, Gundlach correctly forecast
U.S. Treasury yields would fall, not rise as many others had expected.
http://www.reuters.com/article/us-doubl ... SKCN0UY2EH