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This is peanuts and the system worked as intended against single investors not able to clear. It's the systemic risk that causes large crashes.

Systemic risk comes from a instrument that creates instability and flies under the radar. You can't get solid statistics to estimate the risk for the system as a whole, but everybody is doing it. It's usuaully good idea in microlevel but when everybody does it for leverage, it becomes a systemic risk.

Today margin debt – investors borrow against their portfolios – creates liquidity out of nothing. Securities based loans (SBL's) aka "shadow margin" is the most likely suspect for the next market crash. Brokerage firms entered the leverage markets the same way insurance companies did in 2000's

When you have lots of assets, you can take a loan using them as collateral, typically 70-80 percent. That type leverage has provided massive profits in the last 10 years.

Property markets are also connected to shadow margin. Million dollar apartment in San Francisco allows investors to save their cake and eat it too. They bought property and invested in the markets at the same money. When property values increase, there is more money to invest in stock markets. When the the value of stock portfolio increases, there is more money to invest in the stock market.

It goes up and up until there is perturbation that causes margin calls. Margin calls cause prices to drop and they lead to more margin calls and investors are forced to sell. Then enough people have to sell their properties to cause property values to drop and more margin calls follows.




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