Margin Call

(Margin Call)

Happy April Fools' Day ! Those familiar with the investing world would tell you that when a broker sells some equity, stock, bond, or whatever, to an investor, that investor dispenses with capital, buys it in margin in other words, to complete the transaction. That is a complicated explanation that an investor pays money to buy an equity. If the transaction is on-going, if the time frame is extended, then the same situation applies. However, if a point is reached where the investor can no longer afford the same disbursement, then the broker might initiate "margin call," in order to retrieve his or her own assets.


Donald Trump's Truth Social went public the other day and is trading at about $70 per share. At some point, however, as is common with all investments of this type, there is an initial spike in value as there is a euphoria. People bought this NASDQ traded stock because of its association with Donald Trump. But euphoria can rapidly fade and when investors realize there is no real substance to the stock, that it will not as a company be profitable in the near term. Facts in hand, Truth Social begins to sell off, dropping the price


Trump himself will need to decide the time to un-load some of his shares, without losing money. If the $70 stock price craters to say $20, as is possible, would Trump also face a margin call ? And with Trump's own campaign financing issues, and his ongoing legal fines, if Truth Social begins to lose money, at what point should the endeavor be abandoned (case in point, the firm lost $53 million last year and the share price has fallen to about $53 a share).


Donald Trump is not the only one facing a "margin call." In California, naturally, a $20 minimum wage has just approved. As this is April Fools' Day, all the "remaining" fast food franchises in the Golden State must be thinking all this is some sort of joke. In true liberal fashion, Sacramento has no understanding of economics and how ideas of labor and supply and demand. McDonald's, Burger King and so on will be compelled to raise prices and those locations operating on margins, a margin call in other words, could be forced to close.


One other thing to mention is, for all the billions of dollars committed to the Pentagon, the Defense budget has not kept pace with inflation. The remedy being considered is to slow the acquisition of new aircraft carriers. The Nimitz-Class is reaching the limits of its operational capacity and the follow-on Ford-Class has only one unit (CVN-78) operational and CVN-79 is the one that could be delayed. A margin call could come with a lack of American ability to affect events in the South China Sea, where any aircraft carrier would be an integral component.


A lot of life is lived at the margins. Any day-to-day existence can be a struggle. That being said, however, hiding under one's bed is no good either. Life needs to be lived. It needs to be experienced. And that, would be one's own margin call.

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