OldVet on Japan and Margin Calls

This one is by OldVet…

—

Think we have market problems in the US? Try Japan’s stock index during last year!

And here’s why Gold fell yesterday and today, and FX currencies incl Swiss Francs and even Yen this morning – from head of International trading at Everbank:

“Anyway… All this led to a very strong currency rally, only to see the trap door spring on the rally mid-morning… What was once some lofty levels, soon turned south… I searched and searched for a reason, but there was nothing to be found… So… Turning on my years of experience with currencies, I said… This must be: A. profit taking B. technical correction or C. selling to get money to pay for margin calls.

Yes, those dreaded margin calls which must be flying off the desks of margin clerks these days… Stocks sold off 200 points from the get go… And I then looked at the Dow Jones Industrial Avg. and in the last two months, it is off about 1,000 points, from 13,500 to 12,500… OUCH!

Did I ever tell you that long ago in a far away galaxy, I worked as a margin clerk, and eventually the Margin Manager? We used to have to call people when extra margin was needed and I hated those calls… I had a margin clerk that worked for me that once called a dentist, and told him that his account had a huge cavity, and needed to be filled immediately or he’d have to pull it… We all laughed hysterically, but the poor dentist didn’t think it was so funny… “

Why get margin calls? Because speculators were Long (owned shares) in risky Emerging Market and other export-dependent countries which fell like a stone yesterday, and may do the same from time to time for the next couple of months, at least.

I knew there was some kind of explanation. Looks like the entire Japanese stock market got a margin call.

—

This one was by OldVet.