Black Monday

[Vaygor1]

Hi Vaygor1.

Just curious, if you never sell any shares, where do you get the new funds to take advantage of the new buying opportunities, or are they funds you have invested elsewhere?

Other sources of income (salary, dividends etc) plus cash reserves I'm guessing?

Hi Cricketfan and BDL.

Thanks for your interest.

Funds for buying opportunities come from Margin Lending (which for me has been the case for decades). The real answer to your joint questions is I have been a big margin lender since the late nineties. In recent years I largely stopped buying shares and have essentially used the dividends (in addition to living off and paying ML interest) to reduce my ML debt to currently 7 cents for each $1 in my share portfolio. That leaves a lot of margin to play with if the arśe falls out of the market.

Disc: I have never inherited (or been gifted) a cent from anyone, and I have never won lotto. i.e. I started from zero. Also, I am 49 and my house is now freehold.

The above is short on detail, and may raise more questions than it answers. I can divulge more if you are interested, but doing so at this stage kind of feels like boasting/skiting.

[dragonz]

Is there a set amount to invest to make margin lending viable. They have set costs dont they?

[Vaygor1]

Is there a set amount to invest to make margin lending viable. They have set costs dont they?

Not really.
There is an annual fee that is waived if you borrow enough (ie pay enough in interest) but I don't recall that fee being that much but I would need to check.
The interest rate charged (by ASB anyway) is based on the OCR + a margin. At the moment I think it is all up 6.5% p.a with monthly rests.
ie if you can borrow at 6.5% per annum and use the money to make 15%+ per annum, then the more you borrow, the more you make.
Of course it can go the other way if you get it wrong. The way I describe it is that borrowing money to buy shares (as opposed to not borrowing) will amplify the final result.

[Cricketfan]

Of course it can go the other way if you get it wrong. The way I describe it is that borrowing money to buy shares (as opposed to not borrowing) will amplify the final result.

I honestly don't know how people can sleep at night doing that! It's hard enough worrying about losing your own money, but at least if it happens I don't have to pay myself back!

[couta1]

I honestly don't know how people can sleep at night doing that! It's hard enough worrying about losing your own money, but at least if it happens I don't have to pay myself back!

Yes, even borrowing money against the house could cause concern in a rising interest rate environment, depending on your level of gearing ,but margin lending is on a whole new level again.

[iceman]

I honestly don't know how people can sleep at night doing that! It's hard enough worrying about losing your own money, but at least if it happens I don't have to pay myself back!

No big deal is it. As Vaygor says, he owes 7% of his portfolio currently and even if it was up around 20-25%, I can't see it being a problem. Have done it myself on many occasions, albeit a different arrangement to Vaygor's. I borrow against "excess" equity in rental properties to invest in shares.

Have you ever had a mortgage on a house ? Did you sleep at night or did you stay awake worrying about its value dropping below your mortgage balance ? Myself, I can't really see the difference but of course, how high the gearing is, is the real issue with both types of investment.

[bull....]

way to go , i put a short on thurs morning ..... well overdue correction

outside bar on the weekly ? very telling

wasnt that outside bar very telling on what was to unfold this week.
im sitting here on sunday exhausted from all the hrs i put in this week ( expecting the same next week ) trading those wicked swings on wall street , was truly a experience except the part where my broker locked me out of trading during the flash crash bit earlier in the week ( i heard others had been as well think it was because liquidity dried up big time so maket makers halted the online traders for about 30 mins ? who knows but it was weird missed out adding some serous coin )

anyway doubt this is the end off the correction be ups and downs to come still as the vix still trades very high and we havent tested 3% on the 10yr yet ( that cause some serious fireworks if we get a sustained breakout as there heaps of stops above this level everyone watching ) anyway still expecting a monthly lower bar , its been so long time since we had one in my opinion? my opinion

[couta1]

No big deal is it. As Vaygor says, he owes 7% of his portfolio currently and even if it was up around 20-25%, I can't see it being a problem. Have done it myself on many occasions, albeit a different arrangement to Vaygor's. I borrow against "excess" equity in rental properties to invest in shares.

Have you ever had a mortgage on a house ? Did you sleep at night or did you stay awake worrying about its value dropping below your mortgage balance ? Myself, I can't really see the difference but of course, how high the gearing is, is the real issue with both types of investment.

The difference between what you and I are doing is that no matter what happens to the market, we can't get a margin call, if the market crashes, good companies will still pay divvies which should more than cover our interest only mortgage repayments. All the bank cares about is that we continue to pay the interest on our loans, which is lower than the interest on a margin account(Mine is about 4.5%) although as you say, it depends on how high the gearing is, in the case of Vaygor 1, that gearing is very low and he has done very well.

[Jerry]

Looking at stocks that have dropped more than NZ50 (4.6%) since 12th Jan, I wonder why HBL is down 8.13%. Our interest rates are steady and not set to change.
Others that puzzle me are CNU (-7.1%) and EVO (-9.6%).
I presume currency variation-fears are responsible for ERD (-9.67%) and SKL (-8.3%).

[winner69]

Looking at stocks that have dropped more than NZ50 (4.6%) since 12th Jan, I wonder why HBL is down 8.13%. Our interest rates are steady and not set to change.
Others that puzzle me are CNU (-7.1%) and EVO (-9.6%).
I presume currency variation-fears are responsible for ERD (-9.67%) and SKL (-8.3%).

HBL was pretty expensive / over priced / high PE or how you want to describe it

In ‘volatile’ times over priced stocks tend to fall more

Can’t comment on the others .....esp EVO which is a bit doggy like to start with