This is what starts happening….
“The recent run-up in the market, financial advisers say, has led to a resurgence of the type of loan not seen since the end of the housing boom — cash out financing. But this time, though, people aren’t tapping their inflated house for money. These days stock portfolios appear to be the well of choice.
Financial planners say in recent months clients have taken out so-called margin loans to buy real estate, fund small business acquisitions, or to provide gap financing before a traditional loan could be secured from a bank.
“No one wants to be out of the market for 90 days,” says Mark Brown, a financial planner for Brown Tedstron in Denver. “People just don’t want to sell right now.”
Borrowing against brokerage accounts hit an all-time high earlier this year, according to data from FINRA, and has continued to go higher. Margin loans outstanding totaled nearly $409 billion at the end of April. That compares to $381 billion back in July 2007, the last time stock-market-fueled lending peaked.”
Mr. Roche is the Founder and Chief Investment Officer of Discipline Funds.Discipline Funds is a low fee financial advisory firm with a focus on helping people be more disciplined with their finances.
He is also the author of Pragmatic Capitalism: What Every Investor Needs to Understand About Money and Finance, Understanding the Modern Monetary System and Understanding Modern Portfolio Construction.