This happens all the time. During the SVB saga IBKR had raised PNC margin requirement to 50% while other regionals were not. I had to move that position from IBKR to E*trade and in IBKR move it to different regionals. IBKR maintained such a high margin requirement for more than 18 months. This and overall risk management are the reasons I am moving to spreads.
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Kingran,
Good catch. Yes, I was being sloppy in my terminology. But, also, the words used to describe the coming declines in the value of financial assets don’t much matter. What matters is the change in the purchasing-power of those assets, which is likely to be downward.
Let me explain. When I was a kid, donuts cost a nickel. What is their price today? Even if it hasn’t been shrink-sized, does today’s donut at $0.89 cents (or whatever) taste any better? When I was a kid, I could sent a 1st class letter for the cost of a $0.06 stamp. What does that same stamp cost today? I remember gasoline being $0.27 cents per gallon. And I could cover the cost of a year’s room and board at college on a summer job that paid $1 dollar per hour. (True, we were putting in 70-hour weeks. But I graduated debt-free.) My first house cost $22k. Etc.
Due to the offshoring that gained acceleration in the mid-70’s and the increased deficit-spending, the US economy has become a highly financialized, trash and trinkets economy that serves to enrich a very few at the expense of the many. Much of the rest of the world recognizes this and is moving away from using the $US dollar. When the rest of the world doesn’t want the paper money we print, we go bust.
How soon that bankruptcy becomes official is anyone’s guess. But I do think is both inevitable and soon.
OK, but when you were a kid the median salary was $3,400 a year. Now it’s $62,000. If you were stuffing Benjamins in the mattress then you lost bigly. If you were invested in the stock market, you’re ahead. If you just chased reasonable interest rates at the bank you’re behind but you’re not broke.
It’s not enough just to look at how prices have risen. You also have to take into account how much the other side of the equation has risen. The cost of your donut has gone up by a factor of 17. But your median wage has gone up by a factor of 18, so … not a crisis.
Math, it’s good for the soul.
Yes, the price of something isn’t the whole story. My first computer cost $1,500 and that was for a Pentium 60 with 8MB of RAM. Today, a far better machine is under $300. So, some goods deflation has happened. But how many computers can you eat?
My Mom didn’t work. My Dad, a power plant operator, bought a house and raised a family on a single wage. When he retired, he had a pension and life-time health insurance for himself and his wife. Does that supposed median wage of $62k (or whatever) provide the same basket of goods and services today? Systematically , the middle-income earners in this country have become impoverished, year by year, by our dear government’s printing and spending.
Given that my current income-stream is 4x my current expenses, I can absorb a lot of damage without it affecting my beer-and-bait lifestyle. Also, if I assume an inflation rate of 6% and zero return on investments, I don’t run out of money until age 113 or so. So, I’m hedged. But that doesn’t describe the prospects for most people, and their gambling in the equity casinos isn’t a solution to this country’s structural problem of too much private and public debt and not enough genuine economic activity.
A correction/depression is coming, just as it has done so many times before in every empire.
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Sure it does. Copper, Silver, Nickel. It doesn’t really react with those metals, or anything else, but you can definitely mix them. 14 kt gold is 14 parts gold to 10 parts another metal.
On June of 2022, I retired from the working class. My last job was at Rivian Automotive and had a lot of fun with the IT Support team. My entire career, starting in 1984, was all about ‘Computers’… it was the advent of the IBM PC that had me look for jobs regrading computer system and support for the next 48 years.
But in 2002, I was laid off for the very first time and it lasted 8 months (the “Dot Com Collapse). I spent that time first converting 4 of the 401(k)’s I had over the course of 13 years. It wasn’t as much as I would of hoped. But from 1998 -2002, I was subscribed to TMF and bought the book “How To Invest With A Silver Spoon”. It was that point that without trying hard, I could retired. By June 3rd 2022, I spent my last day at Rivian with friends that I continue to keep in touch with to this day. I was 63 at that point. And it was all thanks to the TMF. Of course we were “just” getting out of the shadows of COVID so it wasn’t as large as it could of been but I knew this would pass. The simple act of investing company dividends of some large corps such as Exxon or Chevron, Microsoft and Nvidia, and a bunch of others that TMF recommended, some are now gone, others were more of the conviction level that TMF applied so I went for them. I’m also happy they would tell me to sell when that conviction was no longer valid. But from the beginning, I knew I wanted to retire, at least comfortably. I’ve never travelled excessively, and I found I’m more of a home body; maybe go bowling once a week, drive to San Francisco to visit my old home town, but mostly just watching movies in theaters or via Netflix and Blu-Rays. I’m content and never went for “being rich”… but this retirement nest egg allowed me to buy my 2024 RAV4 in cash. My wife did the same for our daughter just a week ago : 2026 Civic Sport. Planning on both our parts allowed us to have cash for these cars. Saving money in a rainy day account for 20 years paid off!!! As for another $1M or $2M… well, serendipity is in my corner on that but I just found out last week when my wife only sold 30 shares of her company stock that she paid for via ESPP program for the past 25 years and this was the very first time she sold shares to buy our daughter a new Honda Civic Sport Hybrid… in CASH. That’s when I finally saw both her retirement and stock program. Her first shares she bought were around $65/shr. But we are the same types; low key, some travel but would rather stay home but then again, she’s never been laid off much less retired; she has 3 more years to 65. I’m not complaining. 
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