Wednesday, August 26, 2015

"Leverage of this magnitude is 'gasoline waiting on a match.' "
"Since margin debt is a function of the value of the underlying "collateral," the forced sale of assets [may] reduce the value of the collateral further triggering further margin calls.

'May', because the Fed may step in 
and make most feel better,

Those margin calls [may] trigger more selling forcing more margin calls, so forth and so on.

'May', because other central banks who already have
may decide to purchase equities en mass,
forestalling reality, again. 

Notice in the chart that margin debt reductions begins innocently enough before accelerating sharply to the downside."
Wednesday, July 1, 2015; Bill Gross on the global bond market upon which Rick Lusk etc... and the City of Greensboro bet $102 million on

Tuesday, March 31, 2015; Margin Debt and our local government pursuing illusions
"What is a Minsky Moment?

A Minsky moment is a sudden major collapse of asset values...

Sudden collapse via a minority perceived set of imbalances
that with enough of the population figuring it out,
affects a change in the confidence/belief/perception to the point
that too many become aware in too short of time.

Minsky moments occur after long periods of prosperity
and inflationary investment values
lead to increased leveraged (borrowed) speculation.

Spiraling debt
incurred in financing non income producing speculative investment
leads to cash flow problems for investors.

The cash generated by their assets
no longer is sufficient to pay off the debt they took on to acquire them.

The banks lent too much,
consumers borrowed too much,
the Federal Reserve and other central banks
bailed out their patrons with funny money,
reflating a big bubble into a huge, global, simultaneous
government sponsored liquidity fest.

Losses on such speculative assets
prompt lenders to call in their loans.
likely leading to collapse of asset values
leading to a sudden and precipitous collapse
in market-clearing asset prices,
a sharp drop in market liquidity,
and a severe demand for cash."