For those that don't remember some of the previous financial issues (s&l, dot-com, MBS) one thing to note is that folks with little/no debt faired better. Leverage is for quick plays. Going long...
For those that don't remember some of the previous financial issues (s&l, dot-com, MBS) one thing to note is that folks with little/no debt faired better. Leverage is for quick plays. Going long on leverage is not smart.
Dot-com really sticks in my head. Saw all these folks levered to get in the market, fancy car on 4yr term. Loads of them got stuck upsidedown when the music stopped.
My brother worked in Silicon Valley when the dot com bubble burst. Several of his coworkers would get margin called a few times a week. Their mortgages were bought using their portfolios as...
My brother worked in Silicon Valley when the dot com bubble burst. Several of his coworkers would get margin called a few times a week. Their mortgages were bought using their portfolios as collateral. What a house of cards nightmare.
AI mania has gripped any number of stock markets across the globe in recent months — South Korea, China, the U.S. — but perhaps nowhere is it as frenzied as in Taiwan, the No. 1 producer of the chips that power the technology.
Teenagers are rushing to open brokerage accounts; spikes in trading volumes are crashing firms’ websites; and the Taiwanese market, up over 100% in the past year, is rallying so fast that in a matter of weeks it overtook the U.K., Canada and India to become the world’s fifth largest.
Much of this boom is, like in Cheng’s case, fueled by heaps of money borrowed at rock-bottom interest rates. So much so that many of the island’s brokerages have hit their internal limits on certain types of loans, forcing them to demand more collateral and bump up their rates, according to people familiar with the matter. Those investors who are rebuffed by their brokers often just turn to their banks for leverage instead, taking out new loans or canceling financial products to free up cash.
The borrowing binge is so intense, and has spread so deeply across the financial system, that it even disrupted a recent central bank debt auction. Not enough buyers showed up to buy all the debt on sale on June 3, the first time that’s ever happened.
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Moreover, the speculative mania sweeping Taiwan today is rapidly approaching the fevered pitch it reached during the dotcom days. Over the past 12 months, the amount of money investors borrowed from brokerages to finance stock purchases swelled 160%, leaving it near an all-time high set just before the 2000 crash. That surge in margin debt, as it is called, dwarfs the 50% increase recorded in the final 12 months of the bubble back then. It even tops the 94% rise posted recently in Asia’s other AI powerhouse, South Korea, a country where the government has worked relentlessly to fan stock-investing fever and drive the market higher.
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Investor demand for loans has been so torrid that Taiwanese brokers have themselves embarked on a borrowing spree to shore up working capital. They’ve issued nearly $1.2 billion in bonds this year, more than seven times the amount raised in all of 2025.
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Some firms have instructed sales staff to push their most aggressive clients to rein in risk. Others have started stress-testing their loan portfolios against a sudden plunge in the market of, say, 20% or 30%.
For those that don't remember some of the previous financial issues (s&l, dot-com, MBS) one thing to note is that folks with little/no debt faired better. Leverage is for quick plays. Going long on leverage is not smart.
Dot-com really sticks in my head. Saw all these folks levered to get in the market, fancy car on 4yr term. Loads of them got stuck upsidedown when the music stopped.
My brother worked in Silicon Valley when the dot com bubble burst. Several of his coworkers would get margin called a few times a week. Their mortgages were bought using their portfolios as collateral. What a house of cards nightmare.
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