the definition of irony

via Business Insider, September 22nd:

Screen Shot 2015-09-27 at 9.43.09 AM

In a press briefing on Tuesday, Mike Wilson, chief investment officer of Morgan Stanley wealth management, said consumer behavior was starting to show signs of excess as the economic recovery reaches its later stages.

Here’s Wilson (emphasis added):

“Consumers are feeling pretty good, and they are starting to spend money again, and they’re starting to do dumb things. They’re starting to borrow money, they’re starting to maybe buy that house they shouldn’t or that car they shouldn’t.”


You mean things like this?

via Securities-Based Lending By Paul Meyer, Securities Litigation & Consulting Group (SLCG):

The securities industry has long targeted the liability side of the customer’s balance sheet as an opportunity to cross-sell banking products, increase wallet share, and diversify revenue streams away from cyclical trading commissions. Thanks to aggressive marketing by broker-dealers, investors are borrowing against their securities portfolios at a furious pace.

At Morgan Stanley, SBLs totaled almost $38 billion at the end of 2014, a 70% increase in just two years. UBS’s SBLs increased 54% over the same period. Most of this growth has come from non-purpose lending. Total margin debt, as reported by the New York Stock Exchange, is at an all-time high of $507 billion. With $16 trillion worth of client assets in street name, there is still a lot of potential collateral waiting to be encumbered. Substantial profit margins in the lending business make SBLs a lucrative product for broker-dealers. Last year alone Morgan Stanley and UBS earned a combined $4 billion in net interest income just by opening their doors for business.

and like this?

To market these loans, broker-dealers use advertising – disguised as client education – that is often misleading, one-sided, and not fairly balanced with disclosure of the risks associated with SBLs. UBS, for example, extols the wisdom of “borrowing with a vision for your future” and “maximizing the power of your invested assets.”

Morgan Stanley portrays borrowing as a way to “unlock the value of [the customer’s] portfolio.” It claims that borrowing “puts the value of [the customer’s] assets to work.”

Merrill Lynch tells clients that borrowing money will “keep [their] investment strategy on track.” After reading these characterizations of borrowing, a customer cannot not be blamed for concluding that he is imprudent if he is not borrowing against his portfolio.

Since adviser behavior is driven by personal financial considerations, broker dealers offer meaningful incentives to their brokers for recommending SBLs.

Morgan Stanley’s compensation plan is typical. The broker earns an annual gross commission of 0.40% to 0.50% of his clients’ loan balances outstanding. Morgan Stanley also pays its Financial Advisors based on growth in the volume of loans made to clients. For example, a broker who recommends $25 million in new loans is paid a cash bonus (deferred for only five years) of over $100,000. At UBS brokers are also paid based on the total value of the loans their clients have taken on. UBS even rewards secretaries suggesting SBLs as an alternative to customers who are calling to withdraw money from their accounts.

Because if so, I definitely agree. Consumers really are doing dumb things. And they have plenty of help.



This content, which contains security-related opinions and/or information, is provided for informational purposes only and should not be relied upon in any manner as professional advice, or an endorsement of any practices, products or services. There can be no guarantees or assurances that the views expressed here will be applicable for any particular facts or circumstances, and should not be relied upon in any manner. You should consult your own advisers as to legal, business, tax, and other related matters concerning any investment.

The commentary in this “post” (including any related blog, podcasts, videos, and social media) reflects the personal opinions, viewpoints, and analyses of the Ritholtz Wealth Management employees providing such comments, and should not be regarded the views of Ritholtz Wealth Management LLC. or its respective affiliates or as a description of advisory services provided by Ritholtz Wealth Management or performance returns of any Ritholtz Wealth Management Investments client.

References to any securities or digital assets, or performance data, are for illustrative purposes only and do not constitute an investment recommendation or offer to provide investment advisory services. Charts and graphs provided within are for informational purposes solely and should not be relied upon when making any investment decision. Past performance is not indicative of future results. The content speaks only as of the date indicated. Any projections, estimates, forecasts, targets, prospects, and/or opinions expressed in these materials are subject to change without notice and may differ or be contrary to opinions expressed by others.

Wealthcast Media, an affiliate of Ritholtz Wealth Management, receives payment from various entities for advertisements in affiliated podcasts, blogs and emails. Inclusion of such advertisements does not constitute or imply endorsement, sponsorship or recommendation thereof, or any affiliation therewith, by the Content Creator or by Ritholtz Wealth Management or any of its employees. Investments in securities involve the risk of loss. For additional advertisement disclaimers see here:

Please see disclosures here.

What's been said:

Discussions found on the web
  1. Philips HD9190/30 manuals commented on Jan 21

    … [Trackback]

    […] Find More on that Topic: […]