Agreed, ALL stocks would get killed, margin calls would sink many boats. PMs would take a hit initially too but then the tidal wave would change and PMs would become the only safe haven for paper money and people would start to buy bullion, PM EFTs, and PM stocks.
If there is a stock market crash it's 1930s style depression guaranteed. If they don't crash the markets the bankers will inflate and create hype inflation, which is worse scenario I don't know but either way it's not good looking.
What does margin calls have to do with this? I bought my SLW stock with cash not margins or futures. So does this mean even cash purchases can lose it all if the market crashes? I know what ETF's are, but what are PM's? Help me out guys........
ex. if you had $1000 of your money in your account and spend $1000 to buy slw you're not on margin and worst case scenario your stock value can go to $0.
on margin - if you have $1000 of your money in your account you can have $5000 buying power. You go and spend $5000 to buy slw the most you can loose is $5000, therefore you loose your initial $1000 investment plus $4000 on loan from the broker. I don't have exact figures BUT let's say you paid $10/sh on margin, and the stock drops to $8 your broker may send you a margin call and you will have to sell some of your stock to cover the margin and take a loss.
If there is a market crash and you're not on margin you don't have to sell any of your stock even though your investment lost 50% or more, you can wait it out and wait for it to bounce back up. On margin you have to sell and pay your "creditor" first, take losses and hope the value doesn't depreciate more because you will have to liquidate more until all of margin is covered - meaning you may end up owing $4000 to the broker if stock went to $0.
This is just an example. Margin calls occur somewhere around 20% loss if you're fully invested. On top of that you pay interest on "borrowed" money.
Hopefully I didn't confuse you any more. And to my understanding different brokers calculate margin amounts differently and I think that goes also for margin calls as well.