Author Topic: IBKR - Interactive Brokers  (Read 164291 times)

Spekulatius

  • Hero Member
  • *****
  • Posts: 3123
Re: IBKR - Interactive Brokers
« Reply #510 on: March 12, 2019, 04:11:48 PM »
I looked at some brokers 10-k (IBKR, SCHW) and itís clear that the recent revenue and earnings gains are mostly due to increased interest income, due to the short term interest rates going higher than zero essentially. I am wondering however, if this tailwind has worked it way already. I am somewhat concerned that we have seen close to the high in interest rates and may eventually going back to zero with the next recession. That would cut IBKRĎs Ďs earnings by half and SCHW would be reduced even more so.
To be a realist, one has to believe in miracles.


kab60

  • Hero Member
  • *****
  • Posts: 965
Re: IBKR - Interactive Brokers
« Reply #511 on: March 18, 2019, 08:36:38 AM »
I think that's a real possibility. And I think it's a real possibility that rates in the USA will turn negative like in Europa if/when there's a new recession which would obviously be bad for these guys. Now, that might or might not happen (or it might take long to play out), and in the meantime IBKR should continue to grow accounts meaningfully. IBKR was my second largest position but I sold out last week (to bridge a funding gap as I'm buying a car as well as a vacation home - negative rates hell yeah!). Anyway, when my financing is in place (I'm actually getting paid 0,2% to borrow - crazy world) I'm not sure whether or not I'll actually plow my funds into IBKR. 10 years into a bull market I think I might like some of my other bets more.
« Last Edit: March 18, 2019, 09:33:46 AM by kab60 »

stahleyp

  • Lifetime Member
  • Hero Member
  • *****
  • Posts: 2949
Re: IBKR - Interactive Brokers
« Reply #512 on: March 18, 2019, 09:19:45 AM »
kab, how did you pull off getting paid to borrow?
Paul

kab60

  • Hero Member
  • *****
  • Posts: 965
Re: IBKR - Interactive Brokers
« Reply #513 on: March 18, 2019, 09:46:57 AM »
kab, how did you pull off getting paid to borrow?
Welcome to Europe (Denmark) and ZIRP. There's basically (like very basic) two types of real estate loans here (both recourse).

At the moment you can either get a loan with a fixed interest at 1,5 pct. for 30 years, or you can take out a loan with variable interest rates (there's different types that reset every year, every third year or every fifth).

Since our family is not very sensitive to interest rates (low LTV), and since I expect rates to stay lower for longer, we opted for a loan with variable interest rates (that resets twice a year).

It's actually negative atm (like -0,2 pct. I believe) so we get paid a bit to borrow (in reality we pay a tiny amount to the bank that services the loan, so after tax we probably pay around 0,2 pct. or something like that). Basically peanuts. (if there's further questions just drop me a message so we don't clutter this thread).

fisch777

  • Jr. Member
  • **
  • Posts: 60
Re: IBKR - Interactive Brokers
« Reply #514 on: March 25, 2019, 06:34:49 AM »
Wow. I (somewhat) understand negative yields on sovereigns, but negative rate individual mortgage is mind-blowing.  I honestly had to sit here for a second and process that.

IB is in interesting spot.  The risk of declining US rates is very real (and scary for IBKR) at some point in the future, but accounts are growing like a weed, TAM is massive and the company seems to be smartly iterating its offering based on feedback from clients/investors.

How are others thinking about handicapping the rate risk?

Liberty

  • Lifetime Member
  • Hero Member
  • *****
  • Posts: 11384
  • twitter.com/libertyRPF
    • twitter.com/libertyRPF
"Most haystacks don't even have a needle." |  I'm on Twitter  | This podcast episode is a must-listen

MrB

  • Lifetime Member
  • Hero Member
  • *****
  • Posts: 1138
Re: IBKR - Interactive Brokers
« Reply #516 on: April 17, 2019, 09:56:38 AM »
Who knows which security the margin loss of $42m relates to?
https://investors.interactivebrokers.com/ir/main.php?file=latestEarningsPR

As previously disclosed, over an extended period in 2018, a small number of our brokerage customers had
taken relatively large positions in a security listed on a major U.S. exchange. We extended margin loans
against the security at a conservatively high collateral requirement. In December 2018, within a very short
timeframe, this security lost a substantial amount of its value. The customer accounts were well margined
and at December 31, 2018 they had incurred losses but had not fallen into any deficits. During the current
quarter, subsequent price declines in the stock caused these accounts to fall into deficits, despite our efforts
to liquidate the customersí positions. For the quarter ended March 31, 2019, we have recognized an
aggregate loss of approximately $42 million. The ultimate effect of this incident on our results will depend
upon market conditions and the outcome of the our debt collection efforts.

sleepydragon

  • Hero Member
  • *****
  • Posts: 659
Re: IBKR - Interactive Brokers
« Reply #517 on: April 17, 2019, 10:26:57 AM »
Who knows which security the margin loss of $42m relates to?
https://investors.interactivebrokers.com/ir/main.php?file=latestEarningsPR

As previously disclosed, over an extended period in 2018, a small number of our brokerage customers had
taken relatively large positions in a security listed on a major U.S. exchange. We extended margin loans
against the security at a conservatively high collateral requirement. In December 2018, within a very short
timeframe, this security lost a substantial amount of its value. The customer accounts were well margined
and at December 31, 2018 they had incurred losses but had not fallen into any deficits. During the current
quarter, subsequent price declines in the stock caused these accounts to fall into deficits, despite our efforts
to liquidate the customersí positions. For the quarter ended March 31, 2019, we have recognized an
aggregate loss of approximately $42 million. The ultimate effect of this incident on our results will depend
upon market conditions and the outcome of the our debt collection efforts.

DVA? ;)

sleepydragon

  • Hero Member
  • *****
  • Posts: 659
Re: IBKR - Interactive Brokers
« Reply #518 on: April 17, 2019, 10:46:39 AM »
I guess another client of IBKR is ruined.

I think about 15 years ago, I lost my entire savings trading stocks at IBKR. I have never opened account there again. The whole platform/GUI/cheap margins is designed so clients will trade as frequently as possible. Itís very tempting and addictive.  Itís almost evil.
Not buying itís stock too (but it was a mistake)

roark33

  • Hero Member
  • *****
  • Posts: 594
Re: IBKR - Interactive Brokers
« Reply #519 on: April 17, 2019, 12:54:32 PM »
I bet it was Apple, given the large decline in Apple in December, but I am just guessing. 


Who knows which security the margin loss of $42m relates to?
https://investors.interactivebrokers.com/ir/main.php?file=latestEarningsPR

As previously disclosed, over an extended period in 2018, a small number of our brokerage customers had
taken relatively large positions in a security listed on a major U.S. exchange. We extended margin loans
against the security at a conservatively high collateral requirement. In December 2018, within a very short
timeframe, this security lost a substantial amount of its value. The customer accounts were well margined
and at December 31, 2018 they had incurred losses but had not fallen into any deficits. During the current
quarter, subsequent price declines in the stock caused these accounts to fall into deficits, despite our efforts
to liquidate the customersí positions. For the quarter ended March 31, 2019, we have recognized an
aggregate loss of approximately $42 million. The ultimate effect of this incident on our results will depend
upon market conditions and the outcome of the our debt collection efforts.