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-- been this good in years you know that but behind the headlines here said troubling new development.
Take a look at this line from the Wall Street Journal this morning.
They said small investors are borrowing against their portfolios at a rapid clip reaching levels of debt not seen since the financial crisis.
That's right as the market goes up investors are leveraging up with it.
Borrowing against the gains in their portfolio just like they did right up to the dotcom -- and right before the last market crash.
But this new found love of leverage comes with a huge risk to all investors here to help us break it down.
Hilary Kramer president and chief investment officer at bay NG capital and the editor of game changer -- welcome back.
So I find this kind of troubling I had maybe it maybe call me crazy but all of this borrowing on margin.
Is this a sign of a great bull market or the fact that maybe were coming to the end and it's all gonna blow up.
It could actually be a sign of both Jerry but it doesn't mean that at some point in the music stops and it needs to it has -- Long term of course -- grateful and believe in in equities and that I've come across the board with.
That but but right now there are so many investors individual investors are borrowing.
Against -- money that they have in their stock account as their equity keeps going up and hitting 52 week highs.
They're taking the money I'll tell what does this tell you does this tell you they can't get money from lenders sperm banks.
I read about one fellow who would elaborate his portfolio so they -- put into his house to a renovation on his house I well first of all.
It's it's anywhere from.
To three and a half percent prime maybe it's 4% to borrow off of your stock portfolio.
So you have individuals doing everything from.
Using their stock portfolio just to keep buying more stock because they think that that I Biotech what -- telling update.
That's what the tradition is of leveraging of march inning which is you have a dollar.
But you -- two dollars against that.
But what I know our individual investors that are pulling money out to pay credit card debt to trip to pay their credit card.
And they don't want to sell the underlying -- because they think for example that they're stock in the gap or Abercrombie hear me out all her.
Our yes will do well.
Act yes will never go down.
-- tell -- I still haven't been that it's not about how this can rebound against you.
-- -- well what happens is think about the spiral downwards.
All of the sudden let's say something happens a great with the very tenuous situation with Japan because.
Our currency -- US currency keeps getting stronger against the Japanese yen we keep hearing about this -- winding its going on about all these interesting currency trade.
All of a sudden the markets start to go down and with the bank is gonna do the brokerage house it's going to suddenly say to the individual investor we're just gonna sell stock if you don't show up with Kay -- She used to start selling but my finish is not just -- to hold -- to the very last moment and in the brokerage goes in and sales and that's when you have this downward spiraling of stocks.
I especially the big boys have big fast money is also being forced to sell and they are all in the same stocks and this if you if you do ahead if you have -- heavily against your portfolio this could put you in in very bad way.
Absolutely and even if it's wonderful hard core consumer discretionary stocks or are industrials like Honeywell -- three and that.
-- and hit a new high today.
You still ran into a problem because when the market goes down everything goes down and things go down much faster than they go up so that warning -- just be careful keep your powder dry.
And wait for keeping Howard yeah I like that Hillary thanks for coming -- it's always great to see you thank you.
Our -- now it's time for a look at stories your clicking on site on foxbusiness.com.
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