Woodstock, Three Days, Three Hundred Billion Dollars discussed on Next Week in Stocks

Automatic TRANSCRIPT

Money they don't have to put up one hundred percent of the money when they buy stocks so you only put a path the money so what happens is is because people are borrowing and then they're making money then it brings more money into the market on margin and people look at this it's just like what drives a housing bubble everybody sees it everybody else's getting rich doing this so everybody else starts pie went on and as stock prices go up it becomes a self fulfilling prophecy and you get more borrowing capacity even if you don't sell the stocks the problem is is that when stocks fall again you have three days to come up with more money otherwise if you go below a certain dollar value of how much you have to support the stocks you bought on margin if you've borrowed too much money against it your brokers gonna come back to you and insist that you come up with more money and they don't just like say hey you know when you get a chance okay you got three days and if you don't come up with more money and as i said in the last segment people have no money people are sitting on negative cash balances and they're trading accounts of about three hundred billion dollars right now because people have borrowed six hundred and sixty billion dollars to buy stocks on margin so that's effectively doubling their capacity to be able to buy that creates a huge amount of demand but conversely when you get the margin call and you're told you don't have enough money in your account that becomes the vicious cycle where people then have to sell they sell whatever price they can get if you don't make the decision of woodstock's to sell your broker just start selling them for you and now you have more supply coming into the market the price of a share of stock is based on supply and demand and absolutely nothing else so if price starts coming down than other people get margin calls and what you'll find if you go back.

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