Author Topic: What's the TLDR on margin loans on large stock balances  (Read 12954 times)

Dgmp

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What's the TLDR on margin loans on large stock balances
« on: January 08, 2021, 06:59:03 AM »
Guy on twitter (tweets below) who made out like a bandit in stock market.  Says planning to retire and use margin loans from a place called interactive brokers so he does not need to sell any stock.

I understand the rates are floating.  Does anyone know how this actually works? Clearly, being able to borrow at .75% is interesting, and way better than my mortgage rates.  Thought I'd check here before investing any further time.  Please no comments on Tesla...pretend its Vanguard total market index fund for purposes of what I want to understand,

"Today I’m retiring from the corporate world at age 39.<br><br>Not selling any shares for the foreseeable future". (shows 11M investment account balance)
"Soon I’ll be able to margin borrow about $3 million at less than 1%, but I will probably only borrow up to 8% of the value of my liquid assets. This way I never have to sell my shares."
"SMust withstand an 80% reduction in $TSLA without triggering a margin call. If maintenance requirement is 60%, and you can borrow a max of 40% of you equity, then (1-0.80)*(1-0.60) = 8% max borrowing against equity. Borrow $80k for every 1 million in $TSLA. Not financial advice."

- @jasondebolt

https://twitter.com/jasondebolt/status/1347288965653565441?s=20
« Last Edit: January 08, 2021, 07:02:25 AM by Dgmp »

Financial.Velociraptor

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Re: What's the TLDR on margin loans on large stock balances
« Reply #1 on: January 08, 2021, 09:00:09 AM »
IB has great margin rates.  I stay fully invested and use the option of taking a margin loan as my emergency fund.

There are risks.  Your loan basically magnifies gains and losses in your account.  Also, IB and other brokers can and do change their margin rules on short notice often.  In times of market volatility, entire classes of assets can have their margin requirement increased, sometimes dramatically.  A margin violation at IB does not result in a "margin call" where they politely ask you deposit more cash.  Instead a computer algorythm starts automatically liquidating your positions at market until the margin requirement is met.  You can blow up an account quickly like that.  You likely wouldn't even know it was happening until too late.

Consider this, say he is right and he can "safely borrow 8%".  In the next market crash, when his holdings are down 50%, he suddenly is at an unsustainable 16%.  And this is during a period where IB will be increasing his margin requirements.  He could quickly end up at 33% or more effective leverage. 

I have to wonder what this guy is thinking if he believes he can in effect use margin to sustain a 8% withdrawal rate indefinately.  Smarter would be to tilt into medium yielding REITs, BDCs, CEFs, and MLPs to get 6% or so yield and then write out of the money covered calls for the remaining 2% to get to 8%.  No leverage and no interest payments. 

MustacheAndaHalf

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Re: What's the TLDR on margin loans on large stock balances
« Reply #2 on: January 08, 2021, 09:43:07 AM »
Most brokerages charge 7-9% for margin loans, so IBKR's rates are very low.  But up to $100,000 of margin loans at IBKR costs 1.59%, nothing less.  So if that $11M Twitter personality takes out an $80k loan, that costs them 1.59%.
https://www1.interactivebrokers.com/en/index.php?f=46376

Keep in mind there's a mix of luck and skill in the stock market, and it takes a very long time to distinguish between the two.  If someone invests in TSLA on margin, since Tesla didn't drop, they never had a margin call.  So yes, they "never sold", because they got lucky.

To flip my investment style around for a moment, if someone invested everything in Macy's stock a year ago (Jan 2020), even going 1.5x on margin would have wiped them out.  After Macy's stock dropped 75% in March, they would get a margin call, and their stock would be sold off - against their will - by IBKR.  The proceeds would go to pay off the loan, leaving the investor with $0 left.  Owing to the fast timing, they might even owe money.  Picking a stock that never dropped, and never had a margin call, is lucky.

One side note, I mention Macy's a lot not because it's my only stock holding, but because I don't want to reveal all the others.  Some of my stock holdings are so small and risky that, to quote Vanguard, they "have a 100% margin requirement", which means they don't count as an asset towards taking a margin loan.

Dgmp

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Re: What's the TLDR on margin loans on large stock balances
« Reply #3 on: January 08, 2021, 10:34:56 AM »
Thanks All.

But if you aren't using it to leverage in stocks, can you really spend that on anything?  I would have thought the money needs to stay in the brokerage accounts at the very least as its intended to be used for trading.  I don't think he is saying he is taking a loan to lever up. 

I think he is saying he wants to leave his 11M invested, take a loan of $880,000 and then live off that for the next ten years when he has 20M and can rinse and repeat - all without realizing any capital gains or income anywhere.

In another example, I have a $380k mortgage right now at 2.875%. I can afford to pay this off 5x over with what I have in index funds, but I don't since interest rate so low.   However, a .75% rate is much better than 2.875. And I assume I pay this like an interest only loan then without any principal which drastically changes my monthly cash flow picture until eventually they jack the APR and I'd choose to sell stock and pay it off?
« Last Edit: January 08, 2021, 10:43:55 AM by Dgmp »

ChpBstrd

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Re: What's the TLDR on margin loans on large stock balances
« Reply #4 on: January 08, 2021, 02:02:18 PM »
Sounds like he is just proposing to live off of loans so that he does not have to sell shares. His rationale is that the interest rate must be lower than what the return on this stock will be. Taking out loans to not sell shares in retirement is the same behavior as buying shares on margin.

Interestingly, this is a similar behavior with a different justification than used by this guy in 2007. Prepare to lose a day on this epic 13 year thread! Maybe the top is in LOL!
https://www.bogleheads.org/forum/viewtopic.php?t=5934&postdays=0&postorder=asc&start=0
TL;DR - he runs the risk of getting liquidated at the next bottom.

What's interesting is how, having already won the lottery by not being diversified, he is doubling down on winning the lotto again. He's taking on leverage in order to get even richer than $11M rather than simply diversifying and living on a mere $440k per year. Such is the extent of his deep belief. Such is the extent of greed and social-media-induced risk taking too. Check out wall street bets on reddit to see how oversharing is influencing people to take big risks. Ask yourself, if I had $11M would I be screwing around with leverage to maintain an audience's engagement on Twitter?

He'll almost certainly be fine, but why play russian roulette with a leveraged one-stock AA when you've already won? How happy would he be if his NW dropped to $2M?

Financial.Velociraptor

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Re: What's the TLDR on margin loans on large stock balances
« Reply #5 on: January 08, 2021, 03:45:38 PM »
Thanks All.

But if you aren't using it to leverage in stocks, can you really spend that on anything? 

Yes,

Say you have 11M in TSLA shares and zero cash in brokerage account.  You go to the interface and make a cash withdrawal of $100,000.  You Now have a brokerage account worth 10,900,000, which is broken up into $11M TSLA and minus 100,000 cash loan. 

I have done this for small loans since I prefer to invest my emergency fund.  If I have to spend $5k to replace my A/C unit or other major repair, the margin loan is trivial and temporary.  Instead, I put my former EF allocation into closed end municipal bond funds earning around 5% a year fed tax exempt.

Dgmp

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Re: What's the TLDR on margin loans on large stock balances
« Reply #6 on: January 08, 2021, 04:11:22 PM »
Thanks F.C.  that’s very interesting.

So you kinda are doing the same thing this guy is (ignore that it’s Tesla).  Take a 1% loan to pay expenses so your capital Can remain in higher yielding assets. How have you thought about when small becomes big and therefore it’s too risky to do.

Thanks for what you have shared so far.  I wasn’t aware this could be done, and def like your approach to emergency expenses.

maizefolk

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Re: What's the TLDR on margin loans on large stock balances
« Reply #7 on: January 08, 2021, 05:35:23 PM »
Thanks F.C.  that’s very interesting.

So you kinda are doing the same thing this guy is (ignore that it’s Tesla).  Take a 1% loan to pay expenses so your capital Can remain in higher yielding assets. How have you thought about when small becomes big and therefore it’s too risky to do.

Thanks for what you have shared so far.  I wasn’t aware this could be done, and def like your approach to emergency expenses.

I'm not F.V., but I think it's not a question of small vs big but temporary vs permanent.

Financial.Velociraptor generates a lot of income from options/dividends, and describes using margin loans to smooth out situations where they suddenly need some cash and then retire those loans using their ongoing stream of investment income.

The strategy of the fellow on twitter is to take out an ever increasing margin loan to cover his annual expenses and the interest on his existing loan balance. Because he's retiring with his funding in a single asset which doesn't pay a dividend and which he doesn't intend to sell, the margin loan can only get bigger month after month and year after year. He's just hoping Telsa's stock will continue growing fast enough he'll continue to be able to borrow more each time his interest payment comes due and each time he needs to pay his monthly bills.

MustacheAndaHalf

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Re: What's the TLDR on margin loans on large stock balances
« Reply #8 on: January 08, 2021, 11:19:37 PM »
I think he is saying he wants to leave his 11M invested, take a loan of $880,000 and then live off that for the next ten years when he has 20M and can rinse and repeat - all without realizing any capital gains or income anywhere.
He has a blended rate of 1.147% according to IBKR's website.  Did he mention a 0.75% interest rate on the loan?  Check the website yourself - you'll find he's wrong about that.  That said, 1.08x leverage is reasonable.

It's his money, so if he wants to keep $11M in Tesla, it's his choice.  But for 99% of people, $11M is enough to retire on - and is very hard to rebuild.  Others would be better served by a diversified allocation, maybe 1/3rd each in US stocks, international stocks, and bonds/cash.


In another example, I have a $380k mortgage right now at 2.875%. I can afford to pay this off 5x over with what I have in index funds, but I don't since interest rate so low.   However, a .75% rate is much better than 2.875. And I assume I pay this like an interest only loan then without any principal which drastically changes my monthly cash flow picture until eventually they jack the APR and I'd choose to sell stock and pay it off?
IBKR takes a fraction of your account value, and allows that amount to be taken as a margin loan.  Someone who has $23k in assets at IBKR cannot get a $230k margin loan, for example.  But revisiting your situation, IBKR says the blended rate on a $380k loan is 1.22%  (first 100k at 1.59%, next 900k at 1.09%)

Financial.Velociraptor

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Re: What's the TLDR on margin loans on large stock balances
« Reply #9 on: January 09, 2021, 08:38:26 AM »
Thanks F.C.  that’s very interesting.

So you kinda are doing the same thing this guy is (ignore that it’s Tesla).  Take a 1% loan to pay expenses so your capital Can remain in higher yielding assets. How have you thought about when small becomes big and therefore it’s too risky to do.

Thanks for what you have shared so far.  I wasn’t aware this could be done, and def like your approach to emergency expenses.

I'm not F.V., but I think it's not a question of small vs big but temporary vs permanent.



Maizefolk nailed it.  I have never had a cash out margin loan more than a few thousand and only for a few months.   I could always liquidate my muni holdings for cash as well to extinguish the loan.  Since its short term, I prefer the interest rate arbitrage.

Fuzz

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Re: What's the TLDR on margin loans on large stock balances
« Reply #10 on: January 19, 2021, 05:07:26 PM »
Does anyone do this with Schwab? Or do you have to be with IKBR? For Schwab, it looks like they offer a portfolio loan with a minimum draw of $70K. Or you can buy stocks on margin. I don't see if you can get cash on margin with Schwab and use it for something other than buying more stock?

I have some accounts with Schwab and some with Vanguard. Vanguard doesn't do loans. I was thinking of moving from Vanguard to Schwab to have everything in one place. But it looks like IKBR may be better.

I am a little worried that I would get sucked into options/trading, whereas right now I mostly just invest all free cash in index funds. That said, I would like to buy a couple of protective puts against a big drop.
So anyway, sorry for the thread drift, but anyone have an opinion on Schwab vs IKBR if you want the option to borrow small amounts of money against a portfolio. @Financial.Velociraptor ?

To make the example more concrete: every now and then I buy a tax deed at auction. Those can be 1K to 25K in price. I don't like to have 25K in cash sitting around, so I have used a HELOC in the past and then paid it off from cash flow. Same with buying a vehicle. Would Schwab or IKBR be better for those kind of transactions?

Similarly, I may buy a foreclosure that would be around 30% of the portfolio value. Those are also on the courthouse steps so I need to have funds available same day, but about half the time the foreclosure is canceled at the last minute. Assuming one goes through, I would like to use a portfolio loan as bridge financing until I can clean up the title and do a refinance. Say 6 months. I am worried that I would be taking on a lot of risk for no reason. A HELOC is around 4% and a portfolio loan is 1%, so it's a spread of 3% on 350K. Maybe it saves me 6K over the 6 months to use the portfolio as collateral vs the home. Idk. It's worth paying attention to, but having some weird margin call wipe me out would be devastating.

bacchi

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Re: What's the TLDR on margin loans on large stock balances
« Reply #11 on: January 19, 2021, 06:00:42 PM »
Guy on twitter (tweets below) who made out like a bandit in stock market.  Says planning to retire and use margin loans from a place called interactive brokers so he does not need to sell any stock.

I understand the rates are floating.  Does anyone know how this actually works? Clearly, being able to borrow at .75% is interesting, and way better than my mortgage rates.  Thought I'd check here before investing any further time.  Please no comments on Tesla...pretend its Vanguard total market index fund for purposes of what I want to understand,

"Today I’m retiring from the corporate world at age 39.<br><br>Not selling any shares for the foreseeable future". (shows 11M investment account balance)
"Soon I’ll be able to margin borrow about $3 million at less than 1%, but I will probably only borrow up to 8% of the value of my liquid assets. This way I never have to sell my shares."
"SMust withstand an 80% reduction in $TSLA without triggering a margin call. If maintenance requirement is 60%, and you can borrow a max of 40% of you equity, then (1-0.80)*(1-0.60) = 8% max borrowing against equity. Borrow $80k for every 1 million in $TSLA. Not financial advice."

- @jasondebolt

https://twitter.com/jasondebolt/status/1347288965653565441?s=20

Hope he keeps his skills current.

Telecaster

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Re: What's the TLDR on margin loans on large stock balances
« Reply #12 on: January 19, 2021, 07:03:32 PM »
In the fine print of every margin agreement, including Interactive Brokers, they say they can call the loan at any time for any reason.  And they have no obligation to let you know in advance. 

Financial.Velociraptor

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Re: What's the TLDR on margin loans on large stock balances
« Reply #13 on: January 21, 2021, 08:52:03 AM »


I am a little worried that I would get sucked into options/trading, whereas right now I mostly just invest all free cash in index funds. That said, I would like to buy a couple of protective puts against a big drop.
So anyway, sorry for the thread drift, but anyone have an opinion on Schwab vs IKBR if you want the option to borrow small amounts of money against a portfolio. @Financial.Velociraptor ?

@Fuzz I've never been with Schwab.  IB is known for the very lowest margin rates.  But they are also known for not issuing margin calls and just automagically liquidating your positions to protect their own interests. 

Getting into options is a good thing!  Haha.  I know, I'm the local heretic.  90% or more of investors should be indexed.  If it feels right for you stick with it.  You might consider buying a short bias fund for down side protection instead of puts.  With options, you have deteriorating time value.  You don't just have to be right about the move, you have to be right about the timing. 

Best of luck!

ChpBstrd

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Re: What's the TLDR on margin loans on large stock balances
« Reply #14 on: January 21, 2021, 10:41:33 AM »


I am a little worried that I would get sucked into options/trading, whereas right now I mostly just invest all free cash in index funds. That said, I would like to buy a couple of protective puts against a big drop.
So anyway, sorry for the thread drift, but anyone have an opinion on Schwab vs IKBR if you want the option to borrow small amounts of money against a portfolio. @Financial.Velociraptor ?

@Fuzz I've never been with Schwab.  IB is known for the very lowest margin rates.  But they are also known for not issuing margin calls and just automagically liquidating your positions to protect their own interests. 

Getting into options is a good thing!  Haha.  I know, I'm the local heretic.  90% or more of investors should be indexed.  If it feels right for you stick with it.  You might consider buying a short bias fund for down side protection instead of puts.  With options, you have deteriorating time value.  You don't just have to be right about the move, you have to be right about the timing. 

Best of luck!

Paper trading may lack excitement, but it offers an invaluable education.

EricEng

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Re: What's the TLDR on margin loans on large stock balances
« Reply #15 on: January 21, 2021, 01:51:49 PM »
I had made a margin investing thread just recently, didn't get much valid argument against it.  Interactive Brokers do look like a good choice.
https://forum.mrmoneymustache.com/investor-alley/robinhood-margin-2-5-vs-mortgage-investing/

Still very tempting to do, but given how inflated the market is atm, you wouldn't want to do it all at once.

cchrissyy

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Re: What's the TLDR on margin loans on large stock balances
« Reply #16 on: January 21, 2021, 05:50:23 PM »
Quote
Does anyone do this with Schwab? Or do you have to be with IKBR? For Schwab, it looks like they offer a portfolio loan with a minimum draw of $70K. Or you can buy stocks on margin. I don't see if you can get cash on margin with Schwab and use it for something other than buying more stock?

yes with schwab you can withdraw more than your available cash and it creates a margin loan.  i did this just recently because i needed to sell money market and bonds in order to wire money out, and those funds had not settled yet so i wired it anyway, creating a margin loan that will only last a few days before it resolves itself.  i've done similar to buy shares within schwab with funds that were not yet available.

possibly this has to do with individual account settings or the paperwork when you open the account. clearly, i have margin enabled even though i hardly use it.


alternately, Schwab has a Pledged Asset Line, which is a very low interest loan, secured by your portfolio. it carries all the risks of margin as mentioned above and can NOT be used to buy securities. it's meant to be transferred out for spending such as taxes, real estate, college.  https://www.schwab.com/pledged-asset-line

MustacheAndaHalf

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Re: What's the TLDR on margin loans on large stock balances
« Reply #17 on: January 22, 2021, 07:41:01 PM »
Schwab charges 8.325% for the first $25k
https://www.schwab.com/margin/rates

IBKR charges 1.59% (IBKR Pro, $10/mo) or 2.59% (IBKR Lite, $0/mo) for that amount
https://www1.interactivebrokers.com/en/index.php?f=46376

Paul der Krake

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Re: What's the TLDR on margin loans on large stock balances
« Reply #18 on: January 22, 2021, 07:47:11 PM »
I have considered moving a couple hundred thousand dollars over to IB solely because of the cheap margin to smooth out cashflow, but I could never quite figure out what the worst case scenario.

If they can unilaterally set the maintenance requirement to 100%, then it doesn't matter how little I borrow, they could start liquidating at any time.

Financial.Velociraptor

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Re: What's the TLDR on margin loans on large stock balances
« Reply #19 on: January 25, 2021, 09:03:47 AM »
I have considered moving a couple hundred thousand dollars over to IB solely because of the cheap margin to smooth out cashflow, but I could never quite figure out what the worst case scenario.

If they can unilaterally set the maintenance requirement to 100%, then it doesn't matter how little I borrow, they could start liquidating at any time.

When you own something, whether you have a margin loan or not, if IB increases the margin requirement, they warn you ahead of time.  You usually have a week or so adjust your holdings.

bacchi

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Re: What's the TLDR on margin loans on large stock balances
« Reply #20 on: January 25, 2021, 09:27:27 AM »
I have considered moving a couple hundred thousand dollars over to IB solely because of the cheap margin to smooth out cashflow, but I could never quite figure out what the worst case scenario.

If they can unilaterally set the maintenance requirement to 100%, then it doesn't matter how little I borrow, they could start liquidating at any time.

When you own something, whether you have a margin loan or not, if IB increases the margin requirement, they warn you ahead of time.  You usually have a week or so adjust your holdings.

For the election, they warned ahead of time.

In 2008, when they tightened their margin requirements multiple times, it was communicated the previous evening with only about a 12 hour notice. I remember getting up in a panic the next morning to wire money.

bacchi

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Re: What's the TLDR on margin loans on large stock balances
« Reply #21 on: January 25, 2021, 09:55:25 AM »
As an aside, here's a tale of two brokers. I was short naked puts in 2008 -- picking up nickels in front of a steam roller.

When IB raised their margin, my puts were still OTM but were obviously in danger of being exercised. I lost a lot of money (low 6 figures) in my IB account closing those puts and had to wire money to do it on my terms rather than rely on their liquidation algorithms.

Man Financial, on the other hand, did not raise their margin requirements. My short puts expired worthless and my account actually made money that October. Sadly, MF was stealing money from their customer accounts and went out of business a few years later.


tl;dr IB is very aggressive with margin. They protect their own position quickly and steadfastly.

Financial.Velociraptor

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Re: What's the TLDR on margin loans on large stock balances
« Reply #22 on: January 26, 2021, 04:52:51 PM »
I have considered moving a couple hundred thousand dollars over to IB solely because of the cheap margin to smooth out cashflow, but I could never quite figure out what the worst case scenario.

If they can unilaterally set the maintenance requirement to 100%, then it doesn't matter how little I borrow, they could start liquidating at any time.

When you own something, whether you have a margin loan or not, if IB increases the margin requirement, they warn you ahead of time.  You usually have a week or so adjust your holdings.

For the election, they warned ahead of time.

In 2008, when they tightened their margin requirements multiple times, it was communicated the previous evening with only about a 12 hour notice. I remember getting up in a panic the next morning to wire money.

Good to know bacchi.   I thought they always gave sufficient notice.  I currently have almost 27k in cash at IB in my margin account and hope to build more to scoop up bargains in the next inevitable 50%+ crash (P/E and P/S have gotten cray cray).  I have a lot of in the money bear put spreads that cause my margin estimate to display a "?" in front.  I suppose I could get a notice from them but my spreads are all on slow moving Dividend Aristocrats.  If margin req goes up to 100% on those we are already in the apocalypse and stock holdings will be worthless.

Dicey

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Re: What's the TLDR on margin loans on large stock balances
« Reply #23 on: February 05, 2021, 10:10:41 AM »
Just read Pete's latest blog post. Bumping this thread to page 1.

rahby1us

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Re: What's the TLDR on margin loans on large stock balances
« Reply #24 on: February 12, 2021, 11:01:21 PM »
It seems silly to not take money at 1.09% -1.6% interest rates despite the fact that they are variable, right? Like why should i not take out a conservative percentage of my portfolio like 10-15% and just throw in it Vanguard.

Looking at the chart below every single period of increasing rate since 1971 has coincided with an increase in the S&P500.

https://www.financialsamurai.com/historical-stock-market-performance-when-interest-rates-rise/

If the market doesn't go up, i'll just hold on. The VTI dividend covers the interest for the down years, and a 75-80% total market decline is necessary for a margin call.


electriceagle

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Re: What's the TLDR on margin loans on large stock balances
« Reply #25 on: February 15, 2021, 04:24:41 PM »
If he moves it out of TSLA and into a reasonable set of index funds, its a reasonable strategy for optimizing the timing of fund sales for tax purposes. That's about all.

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Re: What's the TLDR on margin loans on large stock balances
« Reply #26 on: February 16, 2021, 11:27:12 AM »
As an aside, here's a tale of two brokers. I was short naked puts in 2008 -- picking up nickels in front of a steam roller.

When IB raised their margin, my puts were still OTM but were obviously in danger of being exercised. I lost a lot of money (low 6 figures) in my IB account closing those puts and had to wire money to do it on my terms rather than rely on their liquidation algorithms.
Based on your experience, maybe I should write down my margin / liquidity each week, and take action if IBKR makes changes.

Do you recall the multiple of the increase?  For example, as you mentioned the 2020 election was a gradual increase of +50%.

I sold puts back in December when options were very expensive, so I had two ways to win: the beaten up stocks recover further, or volatility takes their time value down.  I also bought some very cheap, low priced puts that will mitigate damage in the event of a bankruptcy.

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Re: What's the TLDR on margin loans on large stock balances
« Reply #27 on: February 17, 2021, 12:17:39 AM »
"What's the TLDR on margin loans on large stock balances?"

Don't do it.   THAT's the TLDR on this topic.

If someone isn't willing to take the time to REALLY know what the HELL THEY ARE DOING, they have ABSOLUTELY NO BUSINESS doing this.

Hope that was VERY CLEAR.




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Re: What's the TLDR on margin loans on large stock balances
« Reply #28 on: February 17, 2021, 12:20:54 PM »
Don't do it.   THAT's the TLDR on this topic.

I'm 100% in agreement with SwordGuy.  I've been a long-term investor since my
college days in the early 1980's and have seen investors absolutely destroyed by
using margin.

Don't believe us? 

Rick Guerin was one of the preeminent investors in the last century, rivaling the
prowess of Warren Buffett and Charlie Munger (whom he worked alongside with
on some early deals):

https://www.gurufocus.com/news/1312362/case-study-the-fall-of-rick-guerin

-Rubic

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Re: What's the TLDR on margin loans on large stock balances
« Reply #29 on: February 17, 2021, 12:35:00 PM »
Don't do it.   THAT's the TLDR on this topic.
I'm 100% in agreement with SwordGuy.  I've been a long-term investor since my
college days in the early 1980's and have seen investors absolutely destroyed by
using margin.

Don't believe us? 

Rick Guerin was one of the preeminent investors in the last century, rivaling the
prowess of Warren Buffett and Charlie Munger (whom he worked alongside with
on some early deals):

https://www.gurufocus.com/news/1312362/case-study-the-fall-of-rick-guerin

-Rubic
You might need to find some new examples.  From that article:
"According to Buffett's essay, between 1965 and 1983, Guerin's partnership produced an annual compounded return of 32.9% excluding fees."

Speaking of Warren Buffet:
"Based on numbers disclosed by the company in those public filings, we estimate that Buffett applies a leverage of about 1.6-1, on average. This is a non-trivial use of leverage ..."
https://www.ipe.com/insurance-linked-investments-berkshires-leverage/50982.article

Rubic

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Re: What's the TLDR on margin loans on large stock balances
« Reply #30 on: February 18, 2021, 06:36:47 AM »
You might need to find some new examples.  From that article:
"According to Buffett's essay, between 1965 and 1983, Guerin's partnership produced an annual compounded return of 32.9% excluding fees."

Also from the article:

"Based on the figures highlighted in Buffett's 1984 essay, Guerin's partnership lost around 42% in 1973 and a further 34% in 1974"

Rick Guerin was incredibly lucky that his investors and creditors stuck with him and he didn't get wiped out. Many other investors have not been so lucky.  Rick was also forced to sell his Berkshire stock at $40 per share, now worth $370,500 per share today.

Quote
Speaking of Warren Buffet:
"Based on numbers disclosed by the company in those public filings, we estimate that Buffett applies a leverage of about 1.6-1, on average. This is a non-trivial use of leverage ..." https://www.ipe.com/insurance-linked-investments-berkshires-leverage/50982.article

The major difference is Buffett used insurance float, an un-callable type of leverage completely different than margin.

-Rubic

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Re: What's the TLDR on margin loans on large stock balances
« Reply #31 on: February 18, 2021, 09:53:16 AM »
You might need to find some new examples.  From that article:
"According to Buffett's essay, between 1965 and 1983, Guerin's partnership produced an annual compounded return of 32.9% excluding fees."
Also from the article:

"Based on the figures highlighted in Buffett's 1984 essay, Guerin's partnership lost around 42% in 1973 and a further 34% in 1974"

Rick Guerin was incredibly lucky that his investors and creditors stuck with him and he didn't get wiped out. Many other investors have not been so lucky.  Rick was also forced to sell his Berkshire stock at $40 per share, now worth $370,500 per share today.
Why quote 37 years of performance after Guerin stopped running his fund?  Playing that same game, let's extend Guerin's performance from 1974 to today.  That $40 would have turned into $19,240,000 instead of the much smaller amount at Berkshire.

Guerin's performance in his first 8 years grew the initial assets by 20x.  Then over two years, he lost 62%, leaving his investors with over 7.5x of their assets in 10 years.  Is Guerin lucky that investors accepted a 650% return in 10 years?

And then he grew assets by 20x again in another 8 years.  Investors who stuck with him for 18 years left with 167x their starting assets.  That's why I find it odd to point at someone as a bad example of leverage, when they earned 16,600% in 18 years.


Speaking of Warren Buffet:
"Based on numbers disclosed by the company in those public filings, we estimate that Buffett applies a leverage of about 1.6-1, on average. This is a non-trivial use of leverage ..." https://www.ipe.com/insurance-linked-investments-berkshires-leverage/50982.article
The major difference is Buffett used insurance float, an un-callable type of leverage completely different than margin.
Insurance company leverage involves a risk of default from paying claims.  The customers can "call" the float by filing claims for unpredictable amounts at unpredictable times.  Buffet watched other insurance companies handle it poorly, and go bankrupt in that situation.  It may not be called a margin loan, but it's leverage that has a risk of bankrupting the company, which seems very similar to me.

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Re: What's the TLDR on margin loans on large stock balances
« Reply #32 on: February 18, 2021, 12:18:23 PM »

Insurance company leverage involves a risk of default from paying claims.  The customers can "call" the float by filing claims for unpredictable amounts at unpredictable times.  Buffet watched other insurance companies handle it poorly, and go bankrupt in that situation.  It may not be called a margin loan, but it's leverage that has a risk of bankrupting the company, which seems very similar to me.

yup - but you have the advantage of a constant cash flow inwards of premium and a slow pay outwards as you can slow down and delay payments until you have the funds available.
Buffets insurance companies do an excellent job of being very diligent in examining their claims very thoroughly even at the expense of taking their time of paying out........
not that I would accuse them of deliberately being slow,....... 

MissNancyPryor

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Re: What's the TLDR on margin loans on large stock balances
« Reply #33 on: June 15, 2021, 07:44:39 PM »
Kind of a necro-post on my part, but scanning the original MMM blog entry of January 29th and then this thread I am missing how the interest payments actually get made to IBKR.  Is there a payment made from my checking account back to IBKR monthly or does it come directly from some cash holdings I would have to keep at their site? 

Details:  I am thinking of moving a pile of AAPL over to IBKR so I can borrow against it.  Let's say I put $250K of AAPL over there and borrow $100K as a safe number. 

The interest rate for a 'Pro' account is currently 1.56%, meaning at that rate I will pay $1,560 annually to IBKR-- yes?

How does that $1560 actually get paid?  Do I have to keep that cash on hand within the IBKR account or is it zapped from my normal bank's checking account?  The IBKR search tool revealed nothing on that. 

Finally, check me here, please- it seems like that in my scenario I could only borrow up to $125K if I placed $250K of AAPL with them, but it would be unwise to borrow up to that limit because on a down market day they would start selling off my stock to cover their minimum requirements and I would be wise to keep things really conservative so I never crack that AAPL lot of stock.  If things go as they have for this blue chip and it keeps rising, IBKR will show that I have additional room to borrow more on margin if I want to and I could continue to dip into that pool for house projects or anything else I want, always keeping my total borrowing well below safe percentages.

Am I getting all this right?

Thanks for letting my walk with a zombie'd thread.     

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Re: What's the TLDR on margin loans on large stock balances
« Reply #34 on: June 15, 2021, 08:18:03 PM »
The interest rate for a 'Pro' account is currently 1.56%, meaning at that rate I will pay $1,560 annually to IBKR-- yes?

How does that $1560 actually get paid?  Do I have to keep that cash on hand within the IBKR account or is it zapped from my normal bank's checking account?  The IBKR search tool revealed nothing on that. 

I believe it is a 3rd option entirely: the interest charged for your existing margin loan just increases the amount you owe on your margin loan.

MissNancyPryor

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Re: What's the TLDR on margin loans on large stock balances
« Reply #35 on: June 15, 2021, 09:08:40 PM »
The interest rate for a 'Pro' account is currently 1.56%, meaning at that rate I will pay $1,560 annually to IBKR-- yes?

How does that $1560 actually get paid?  Do I have to keep that cash on hand within the IBKR account or is it zapped from my normal bank's checking account?  The IBKR search tool revealed nothing on that. 

I believe it is a 3rd option entirely: the interest charged for your existing margin loan just increases the amount you owe on your margin loan.

Wow, hard to imagine using the money with a completely deferred repayment.  I am definitely approaching the idea with my mortgage-payoff brain which is confusing me.   

I saw in the Jan 29th blog comments a response from Pete saying the margin loan is interest only, which I expected meant that I had to cover the $1560 but the principle sits.  But instead the interest accumulates and the idea is that people only pay these types of loans back all at once?  I can imagine that would make sense because this is usually used to buy stock on margin and upon selling some or all of the hopefully-richer stock portfolio it was used to create, it all gets paid back along with whatever interest accumulated. 

I wanted to put the loan toward a small rental and my payoff brain has me thinking I would be whacking away at the loan over a couple years, but it must not work like that.  If I understand your response I would instead need to accumulate the repayment cash outside IBKR and then eliminate the margin loan in one payment if their rates become unfavorable or AAPL tanks hard. 

Anyone please feel free to check me on any of this, it is a totally new concept for me.  Thanks!

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Re: What's the TLDR on margin loans on large stock balances
« Reply #36 on: June 15, 2021, 09:16:43 PM »
I wanted to put the loan toward a small rental and my payoff brain has me thinking I would be whacking away at the loan over a couple years, but it must not work like that.  If I understand your response I would instead need to accumulate the repayment cash outside IBKR and then eliminate the margin loan in one payment if their rates become unfavorable or AAPL tanks hard. 

Anyone please feel free to check me on any of this, it is a totally new concept for me.  Thanks!

I think we're largely on the same page. If you wanted to pay off the loan in installments you could certainly wire money to the brokerage and your cash balance would become less negative (i.e. reducing the balance on the loan, and the interest paid each month). Or you could wait and pay it off in one fell swoop.

If AAPL tanks while you have the margin loan IBKR won't give you the chance to wire money in , they would rapidly sell your stock without waiting to talk to you to cover the loan and keep you under their maximum margin ratio. This could leave you with a big and unexpected capital gains tax bill and in any case locks in your losses by selling when the stock is down, the biggest downside of the margin loan strategy as a replacement for a mortgage or other non-callable debt.

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Re: What's the TLDR on margin loans on large stock balances
« Reply #37 on: June 16, 2021, 10:57:24 AM »
Also, AAPL pays a 0.68% dividend. As these payments hit your account, they reduce the amount of cash borrowed from IB. This doesn’t cover all the interest, so the loan is still compounding, but it’s worth tracking.

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Re: What's the TLDR on margin loans on large stock balances
« Reply #38 on: June 16, 2021, 01:24:49 PM »
Not sure why you refer to making one lump sum payment.  I've had margin loans at Vanguard and IBKR, and no lump sum payment is required.

Within a margin account, when you spend past zero, the negative amount becomes a margin loan.  For example, you might start with $250k AAPL and $0 cash.  If you withdraw $100k from IBKR and send it to your bank, your IBKR account will show $250k AAPL and -100k cash.  Every day (or month, I forget), the interest will make that amount go more negative.  So after 6 months, you might have -101k.  IBKR doesn't care which part is principal and which part is interest - you just have an amount you owe.

So you could sell $50k of AAPL and your -101k would become -51k.  You can pay it off incrementally or all at once.  As long as the balance is negative, interest is "added in" by making the balance more negative.  I don't know the limits they impose on withdrawal vs assets held in your IBKR account - I used margin to buy equities.

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Re: What's the TLDR on margin loans on large stock balances
« Reply #39 on: June 16, 2021, 01:41:05 PM »
As long as the balance is negative, interest is "added in" by making the balance more negative.  I don't know the limits they impose on withdrawal vs assets held in your IBKR account - I used margin to buy equities.

The main limit that seems relevant for a buy-and-hold investor is that you need to have stocks worth at least twice your borrowed margin balance at the end of the day. They give you some more wiggle room within trading hours. They have some examples of the various rules being applied on their site.

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Re: What's the TLDR on margin loans on large stock balances
« Reply #40 on: June 16, 2021, 05:00:21 PM »
Using margin in lieu of selling appreciated assets for spending in retirement is a reasonable strategy.  This is far different than using margin to buy investments. It's esp useful during the 5 year Roth ladder bridge. As it allows you to convert more trad to roth and keep the same goal agi as selling shares would.  Or you could lower your agi and convert the same in your ladder while spending margin.  It's a pretty powerful tool. Could it be called yes. Do the rates fluctuate yes. But you're also keeping your money invested likely earning 10-12% in an index fund on avg.

Ibkr allows up to 50% margin on invested assets withdrawn as cash. If you're buying equities they allow 4x during the day and 2x held over night. I wouldn't do the latter but the former is a valuable tool we can all use for various things from emergency funds to helping with he 5 year bridge.
« Last Edit: June 16, 2021, 05:02:03 PM by boarder42 »

ChpBstrd

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Re: What's the TLDR on margin loans on large stock balances
« Reply #41 on: June 17, 2021, 11:12:48 AM »
Using margin in lieu of selling appreciated assets for spending in retirement is a reasonable strategy.  This is far different than using margin to buy investments. It's esp useful during the 5 year Roth ladder bridge. As it allows you to convert more trad to roth and keep the same goal agi as selling shares would.  Or you could lower your agi and convert the same in your ladder while spending margin.  It's a pretty powerful tool. Could it be called yes. Do the rates fluctuate yes. But you're also keeping your money invested likely earning 10-12% in an index fund on avg.

Ibkr allows up to 50% margin on invested assets withdrawn as cash. If you're buying equities they allow 4x during the day and 2x held over night. I wouldn't do the latter but the former is a valuable tool we can all use for various things from emergency funds to helping with he 5 year bridge.

Can you explain the mechanics of using margin to fund a Roth ladder from a tIRA?

boarder42

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Re: What's the TLDR on margin loans on large stock balances
« Reply #42 on: June 17, 2021, 11:47:19 AM »
Using margin in lieu of selling appreciated assets for spending in retirement is a reasonable strategy.  This is far different than using margin to buy investments. It's esp useful during the 5 year Roth ladder bridge. As it allows you to convert more trad to roth and keep the same goal agi as selling shares would.  Or you could lower your agi and convert the same in your ladder while spending margin.  It's a pretty powerful tool. Could it be called yes. Do the rates fluctuate yes. But you're also keeping your money invested likely earning 10-12% in an index fund on avg.

Ibkr allows up to 50% margin on invested assets withdrawn as cash. If you're buying equities they allow 4x during the day and 2x held over night. I wouldn't do the latter but the former is a valuable tool we can all use for various things from emergency funds to helping with he 5 year bridge.

Can you explain the mechanics of using margin to fund a Roth ladder from a tIRA?

So I have to have income for 5 years before the ladder kicks in.  Some comes from previous Roth contributions and some comes from my taxable brokerage. I was planning to sell shares to create 40k of income which will create about 20k of capital gains. To pay no tax on that I have to stay in the 12% bracket so the max I can convert from trad to roth is about 86k mfj standard deduction. Now if instead of selling 40k in shares I borrow 40k on margin I can now convert 106k from trad to roth and keep all that in the 12% tax bracket

MissNancyPryor

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Re: What's the TLDR on margin loans on large stock balances
« Reply #43 on: June 20, 2021, 11:36:16 AM »
Not sure why you refer to making one lump sum payment.  I've had margin loans at Vanguard and IBKR, and no lump sum payment is required.

Within a margin account, when you spend past zero, the negative amount becomes a margin loan.  For example, you might start with $250k AAPL and $0 cash.  If you withdraw $100k from IBKR and send it to your bank, your IBKR account will show $250k AAPL and -100k cash.  Every day (or month, I forget), the interest will make that amount go more negative.  So after 6 months, you might have -101k.  IBKR doesn't care which part is principal and which part is interest - you just have an amount you owe.

So you could sell $50k of AAPL and your -101k would become -51k.  You can pay it off incrementally or all at once.  As long as the balance is negative, interest is "added in" by making the balance more negative.  I don't know the limits they impose on withdrawal vs assets held in your IBKR account - I used margin to buy equities.

Thanks for spelling more of this out.  So if I didn't want to sell any of that AAPL and incur taxes on it, I need to send $100K in cash over to that same account to eliminate the deficit (yes?) which is the lump sum payment I refer to.  That lump sum comes from savings I accumulate outside of IBKR or selling the asset I bought with the loan - a rental property in this case - to clear it.  I think I get it.     

But, since my first post things got weirder and my understanding is still cloudy. 

I moved a $250K stack of AAPL to IBKR and got a gleeful message that my "buying power" is approaching $700K now.  Searching their forums about this term there is something about AAPL being "highly marginable" which spell check does not even recognize as a word but I suspect it means that AAPL is a strong stock that is unlikely to disappear like GME or HTZ could and therefore IBKR is welcoming me to get real jiggy with borrowing to buy stocks ((shudder)). 

I am about giving up on searching their site and reading to understand this and I think I will need to do an example exercise it to figure it out.  IBKR really has zero examples of taking cash out of their site like the MMM blog post example, they just want to talk about clients buying stock or commodities with their loans which to me is like 2 big dogs with wagging tails instead of 1.  Confusing, and some shit is going to get knocked over if I don't get a handle on it.   

To that end I will increase my knowledge by linking my bank to IBKR and do a tiny margin loan, like $5K, to watch the IBKR interface and see what happens as AAPL changes price and dividends come in.  Kind of like a cards-face-up game to learn pinochle, I will watch this in real time.  I bet it snaps into place for me as I watch it, having always been a kinetic learner vs. purely bookish.   

maizefolk

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Re: What's the TLDR on margin loans on large stock balances
« Reply #44 on: June 20, 2021, 12:20:38 PM »
I am about giving up on searching their site and reading to understand this and I think I will need to do an example exercise it to figure it out.  IBKR really has zero examples of taking cash out of their site like the MMM blog post example, they just want to talk about clients buying stock or commodities with their loans which to me is like 2 big dogs with wagging tails instead of 1.  Confusing, and some shit is going to get knocked over if I don't get a handle on it.   

To that end I will increase my knowledge by linking my bank to IBKR and do a tiny margin loan, like $5K, to watch the IBKR interface and see what happens as AAPL changes price and dividends come in.  Kind of like a cards-face-up game to learn pinochle, I will watch this in real time.  I bet it snaps into place for me as I watch it, having always been a kinetic learner vs. purely bookish.   

I think that actually sounds like a very good strategy (try it with a small amount of money and see what happens). You're trying to use margin loans in a way that IBKR really doesn't envision so it doesn't surprise me that their documentation isn't much help.

Please do come back and post what you learn from your experimental loan. My experience has been the absolute BEST person to document something is someone who just got a new process up and running successfully for the first time. People who haven't actually done it (like me) may be missing critical information despite extensively reading on the topic, and people who have been doing it for years will often forget to include critical information because it feels obvious to them after long experience and they assume it will be obvious to everyone else as well.

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Re: What's the TLDR on margin loans on large stock balances
« Reply #45 on: June 20, 2021, 12:56:52 PM »
quoting @maizefolk
Please do come back and post what you learn from your experimental loan. My experience has been the absolute BEST person to document something is someone who just got a new process up and running successfully for the first time. People who haven't actually done it (like me) may be missing critical information despite extensively reading on the topic, and people who have been doing it for years will often forget to include critical information because it feels obvious to them after long experience and they assume it will be obvious to everyone else as well.
[/quote]
~snip

Will do.  Maybe I can throw down a few bread crumbs for my fellow noobs.   

This has been a nice evolution really.  When I read the blog post in January I was very much a no-way, I'm too conservative type of thinker and simply disregarded it.  Then it has come up this summer that my daughter's condo may well get sold out from under her (she rents it month to month and has been under a constant threat of a huge rent increase in this crazy market as well as the likelihood it could simply be sold to someone who wants to live in it and give her the boot).  I could buy it which secures her living situation and would prove to be a great investment for me since I can pay cash for it. 

Then it became hey, why don't I think about buying a small house to rent to strangers for just a little more?  This market is crazy hot but I can pay cash for something if I sold some stock but that triggers all sorts of bad juju with taxes and health credits, so I went back and re-read MMM's post.  And here we are.  The daughter may become the renter there if her condo is scooped but at least she would be taking care of my rental well while she grows in her career and works to be able to buy her own place one day (she is a super straight arrow, no issue with freeloading on mom).  I know all the cautionary statements of being too enmeshed with the kids but also am aware of a few happy stories where it absolutely works out for all involved and would be willing to go down that road.   

I know the market is bubbly but with the Fed showing their cards that they may not raise rates till 2023 there will still be plenty of foam if the property is bought right for cash without all the unnecessary bank appraisal and loan bullshit, and these starter homes are always going to be in demand.  I try to avoid thinking I am getting ready to crush some young family's dream by grabbing a house out from under them with my hyper flexibility, but I came by that muscle honestly.     

Simpli-Fi

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Re: What's the TLDR on margin loans on large stock balances
« Reply #46 on: June 21, 2021, 08:20:50 AM »
Quote
  I’m using the IB margin loan for a Dividend Carry Trade that has been really great. Here is the explanation: I borrow a margin loan (let’s say $100k). I use the funds to purchase a safe high yielding dividend stock that has a yield of 10% which pays monthly. So I pay IB 1% for the margin interest ($83.33/mo or $1,000/yr), collect 10% from the dividend stock ($833.33/mo or $10,000/yr) and I pocket 9% ($750/mo or $9.000/yr). This happens each and every month. It is like manufacturing cash flow out of thin air. Of course IB could raise it’s margin interest rates and of course the dividend stock could go down or stop paying dividends. But there are several stocks out there that have price stability and a long-term consistent paying dividend. I’m going to ride this Dividend Carry Trade for as long as possible.

I went and reread the blog post…and comments.  Towards the bottoms I found this strategy interesting.  What I need a better understanding of is when/how people exit these margin loans as I keep reading these should be considered short term due to rate increases.

 
« Last Edit: June 21, 2021, 09:24:01 AM by Simpli-Fi »

MustacheAndaHalf

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Re: What's the TLDR on margin loans on large stock balances
« Reply #47 on: June 21, 2021, 08:58:52 AM »
Glad my earlier post helped.

I moved a $250K stack of AAPL to IBKR and got a gleeful message that my "buying power" is approaching $700K now.  Searching their forums about this term there is something about AAPL being "highly marginable" which spell check does not even recognize as a word but I suspect it means that AAPL is a strong stock that is unlikely to disappear like GME or HTZ could and therefore IBKR is welcoming me to get real jiggy with borrowing to buy stocks ((shudder)). 
Do you have an "IBKR Pro" account?  It costs $10/month, but you get much better interest rates on the margin loan.  1.6% vs 2.6% for small balances, so any margin loan of $12k or more would favor an IBKR Pro account.
https://www.interactivebrokers.com/en/index.php?f=46376

I think "buying power" refers to what happens if you take a margin loan to buy more AAPL stock.  I'd recommend you write down your exact buying power (down to the last $1) before you withdraw $5k as an experiment.  Then look at it afterwards, and see how far it dropped after your $5k withdrawal.  I expect it to drop much more than $5k (1).

IBKR will not allow you to withdraw $350k cash from an account with $250k in assets, for example.  If you disappear, they would be out $100k.  So your buying power does not refer to what happens when you withdraw cash.

(1) As a side note, you only get one free withdrawal a month.

MissNancyPryor

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Re: What's the TLDR on margin loans on large stock balances
« Reply #48 on: June 21, 2021, 09:18:47 AM »
@Simpli-Fi

It would be interesting to know if that "safe, high yield dividend stock" is still safely yielding its high dividend these months later.  MI192 did not reply when asked to name the golden goose, seems like people never do when asked.  I never get that, wouldn't more buyers inflate the price nicely?  Instead it is all a secret. 

There have been some well known high dividend stocks that have quickly dropped their dividend which kills their price - Century Link was one that already happened, AT&T may be the next one with its announcement last month.  With the evaporation of principle the dividends can never make up for it and buying that stuff on margin is how people get in trouble.  CTL (now Lumen) lost 50% of its price damn quickly and is the kind of event that gets your margin called and your portfolio blown up.  It was paying 12% dividends the week before that.  Ouch. 

     

MissNancyPryor

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Re: What's the TLDR on margin loans on large stock balances
« Reply #49 on: June 21, 2021, 09:25:14 AM »
Glad my earlier post helped.

I moved a $250K stack of AAPL to IBKR and got a gleeful message that my "buying power" is approaching $700K now.  Searching their forums about this term there is something about AAPL being "highly marginable" which spell check does not even recognize as a word but I suspect it means that AAPL is a strong stock that is unlikely to disappear like GME or HTZ could and therefore IBKR is welcoming me to get real jiggy with borrowing to buy stocks ((shudder)). 
Do you have an "IBKR Pro" account?  It costs $10/month, but you get much better interest rates on the margin loan.  1.6% vs 2.6% for small balances, so any margin loan of $12k or more would favor an IBKR Pro account.
https://www.interactivebrokers.com/en/index.php?f=46376

I think "buying power" refers to what happens if you take a margin loan to buy more AAPL stock.  I'd recommend you write down your exact buying power (down to the last $1) before you withdraw $5k as an experiment.  Then look at it afterwards, and see how far it dropped after your $5k withdrawal.  I expect it to drop much more than $5k (1).

IBKR will not allow you to withdraw $350k cash from an account with $250k in assets, for example.  If you disappear, they would be out $100k.  So your buying power does not refer to what happens when you withdraw cash.

(1) As a side note, you only get one free withdrawal a month.

Yes, I got the Pro account.  I plan to take some screen shots and create a tutorial guide for myself since I will only be doing withdrawals very infrequently, and need to understand what happens as the dials turn and AAPL goes up and down.  This will be interesting!     

So hey, if they are charging me $10 a month to have this account there, do they just start a deficit cash balance for me or do I need to move cash there to cover it?  Do they grab part of my AAPL dividend quarterly to cover that fee maybe?  I can imagine if I took a margin loan the would just throw it on the stack of 'negative cash' along with the interest, but if I don't take the loan for a while how does it get paid? 

« Last Edit: June 21, 2021, 09:29:19 AM by MissNancyPryor »