UPDATED SATURDAY MORNING 9:13 AM EDT -- EXTREMELY URGENT: JUST GOT THE WORD "MARGIN CALLS" BEGAN THIS MORNING

It is 11:33 PM eastern US time on Friday, 4 April 2025 and I just got the word: Margin Calls began this morning.

Hedge funds have been hit with the biggest margin calls since Covid shut down huge parts of the global economy in 2020, after Donald Trump’s tariffs triggered a powerful rout in global financial markets.

Wall Street banks have asked their hedge fund clients to pony-up more money as security for their loans because the value of their holdings had fallen as stock values dropped, according to three people familiar with the matter.

Several big banks issued the largest margin calls to their clients since the beginning of the pandemic in early 2020.  I am told these Margin Calls are "much larger than during the 2008 Great Financial Crisis."

The margin calls underscore the intense turbulence in global markets on Thursday and Friday as Trump’s tariffs announcement was followed by retaliatory duties by China, and other countries readied their own responses. Wall Street’s S&P 500 share index was set to post its worst week since 2020, while oil and riskier corporate bonds have sold off heavily.

I spoke about this precisely on my global talk-radio show Thursday evening.   I pointed out to my audience that entities bought Stocks and then used those Stocks as collateral for loans of various amounts, for various things.

I told my audience, "the real danger of the stock market dropping like it is, is that as stock values drop, the Banks will make Margin Calls to those borrowers telling them they need to pony-up more money to collateralize their loans.  Some who borrowed will be able to pay, others will not.   When they cannot pay, the Bank "calls-in the loan" and the Borrower is "in Default."

As more and more defaults happen, more stock values plunge, triggering more stock selling which only makes the whole thing worse.  It feeds on itself!

This immediately triggers the "Credit Default Swaps."   Banks went to Insurance companies and bought protection if the Borrowers Default.  That protection is Credit Default Swaps: If the loan defaults, the Insurance company pays the "Swap."

But as this stock slide continues, more and more loans will default and some Insurance companies may NOT be able to pay-off on those Credit Default Swaps.  The Insurance companies go under.

When they go under, all the OTHER banks that they insured must then book losses ON THE SAME DAY . . . . and the Banks go under.

This is very much like what happened to cause the Great Financial Crisis of 2008.    It was explained very basically in the subsequent Hollywood Movie "Too Big to Fail" in THIS Scene:

While today's troubles are not caused by MORTGAGE-BACKED Securities, as was the case in the year 2008, it now appears it will happen because of loans to Commercial Entities!   

They borrowed money and used Stocks as collateral.

The stocks didn't go up, they have now gone DOWN.

The loans they took are no longer properly collateralized, so the banks call them and say, we need you to put up more collateral or cash.

The Hedge Funds (maybe) can't do it.   They default - and go under.

The Banks took out a sort of Insurance against this, called Credit Default Swaps.   The Banks go to the Insurance Company and demand payment.   Maybe the Insurance company CAN'T pay all the claims - they default and go under.

Now, all the other Banks that those Insurance Companies had Swaps with, have to book losses because the Swaps are no good.  They book all the losses - on the same day - and THEY GO UNDER.

The whole system comes crashing down ---- again.  

No "Bail-Outs" --  This time, "BAIL-IN"

Only THIS TIME, the laws have changed.  THIS TIME, the banks don't get bailed-OUT by government, they get BAILED-IN by . . .  you and me.  Depositors.

When we opened our Checking, Savings, Certificate of Deposit, I.R.A. or 401-K accounts, the terms in the Contract (and the new laws) allow the Bank to TAKE OUR MONEY and swap Stock Certificates in that Bank, for the value of money they took from the Depositor!   YOU AND ME "Bail-IN" the Bank.

While the terms and conditions vary from Bank to Bank, the common theme is that a Depositor CANNOT SELL THOSE BANK SHARES for a year or more!

Sooooooo . . . . what do you and me do for money until then?  

Oh, and once that year or so arrives, who is going to want to buy those Stocks in a bank that went bad?   Probably nobody!

So you and I are left with almost worthless "Stocks" in a Bank that took our money.

GET CASH

Saturday, the banks are mostly open.  I strongly recommend you go in and get SOME cash.   Not to pay Bills, but to SURVIVE for a month or two.  Enough money so you can pay cash to buy food, buy gasoline for the car and such.

If you don't have Emergency food, water, medicines you need to live on . . . GET IT ON SATURDAY because when Monday arrives, this Stock Market sell-off could turn disastrous.

Sleeps with the Fishes

Cramer, from MSNBC put it best today when he reminded everyone of 1987.   He said "When you bottom-fish on a Thursday, then bottom fish on a Friday . . . . . you sleep with the fishes on Monday."

Here's video of him saying that - Friday morning on CNBC:

That term "Sleep with the fishes" is from the movie "The Godfather."   During a Mafia War here in New York City, one of the Corleone family tough guys, Luca Brasi, got killed.   The Mafia family that did it sent Luca's Bullet-proof vest with two dead fish in it, to the Corleone family as a "Sicilian Message: "Luca Brasi sleeps with the fishes."   Meaning, he's dead.

Here is that scene from "The Godfather:"

So when Cramer talked about the pattern in 1987 and said "If you bottom fish on a Thursday, and bottom fish on a Friday, on Monday you sleep with the fishes" he meant your stock accounts were "dead."

This coming Monday,  COULD be THAT Monday!

Prepare.  You have only Saturday morning to do so.

Get SOME cash to live on from the Bank Saturday.  Stash it in your house.   If things calm down and you don't need it, put the money back in a week.

Better to have it and not need it, than to need it and not have it.  Same thing with food.   GET IT SATURDAY.

UPDATE 9:13 AM EDT --

I just found out that on Thursday ALONE, hedge funds sold $40 BILLION of stocks in their largest daily selling spree since 2010. Short sales exceeded longs by 3 TIMES, with North American stocks accounting for 75% of volume.

MORE:

While hedge funds ran to the exit, retail investors bought like never before.

According to JP Morgan, retail investors bought $4.7 billion of stocks on Thursday. This is the largest daily purchase by retail investors since 2015.

Positioning has rarely been this polarized.