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Global Equities

12.4% profit on Pfizer in our upside view

PFEeit

PFE

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15.5% profit on Uber Technologies in our downside view

 

UBERexitUber Technologies Inc All Sessions 20201202 10.29

 

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12% profit on Activision Blizzard Inc in our downside view

ActivisionEXITAtivision

 

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10.2% profit on HSBC PLC in our downside view

HSBCexit

 

HSBC Holdings PLC LSE 20210519 18.03

 

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7.8% profit on Barclays PLC in our downside view

BarclaysEXITBarclays PLC 20210521 20.27

 

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Investors Double Down on Stocks, Pushing Margin Debt to Record

Some investors have been tempted to chase bigger gains—and have exposed themselves to potentially devastating losses—through riskier plays, such as concentrated positions, trading options and leveraged exchange-traded funds. Others are borrowing against their investment portfolios, pushing margin balances to the first record in more than two years, to buy even more stock.

A strong indicator of stock-market euphoria flashed red last month. Investors borrowed a record $722.1 billion against their investment portfolios through November, according to the Financial Industry Regulatory Authority, topping the previous high of $668.9 billion from May 2018. The milestone is an ominous one for the stock market—margin debt records tend to precede bouts of volatility, as seen in 2000 and 2008.

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Investors using margin debt pledge their securities in exchange for loans from brokerage firms to make further investments. They can get into trouble if their collateral falls below a certain threshold, triggering a margin call. They then have the option of either putting up more money or selling the securities underlying the loans.

Many investors also use their margin balances to trade options, contracts that give them the right to buy or sell shares at a specific price, later. Options trading exploded this year as individual investors flocked to the stock market. A record number of options contracts have traded this year. An average of 29 million changed hands each day this year, a 48% jump from 2019, according to data from Options Clearing Corp.

 

If You Sell a House These Days, the Buyer Might Be a Pension Fund

 

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The consulting firm found Houston to be a favorite haunt of investors who have lately accounted for 24% of home purchases there. Investors’ slice of the housing market grows—as it does in other boomtowns, such as Miami, Phoenix and Las Vegas—among properties priced below $300,000 and in decent school districts. The bubble has room to grow before it bursts. But it is inflating fast. Expects home prices to climb 12% this year—on top of last year’s 11% rise and increase at least 6% in 2022, a period of appreciation reminiscent of 2004 and 2005.

That boom was different, fueled by loose lending that enabled individuals to speculate on home prices by racking up mortgages they could repay only if home prices kept climbing. The money party ended a few years later when home prices stopped rising. The ensuing crash wiped out $11 trillion in U.S. household wealth and brought the global financial system to the brink of collapse. 

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Financiers stepped in starting in 2011 and gobbled up foreclosed homes at steep discounts. They dispatched buyers to courthouse auctions with duffel bags of cash. Smartphones and tablet computers—new then—enabled them to orchestrate the land grab and manage tens of thousands of far-flung properties thereafter. They dominated the market for a few years, accounting for about a third of sales in some markets and setting a floor for falling prices. There wasn’t much competition. Stung by losses, banks made it harder for regular home buyers to get a mortgage. Millions of Americans were underwater, owing more on their mortgages than their homes were worth, and unable to move.

 

 

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