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Strategies & Market Trends : Currencies and the Global Capital Markets

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To: Sam who wrote (2372)	1/14/2000 7:31:00 PM
From: Hawkmoon	Read Replies (1) of 3536

I have in mind here my own belief that raising margin rates would be a much method of affecting equity capital than raising rates. By reducing leverage in the capital markets,........., .... would help to deflate the equity bubble that exists. I agree whole heartedly Sam. Raising real rates of interest is like the tail wagging the dog. The issue is that Americans are making a lot of money each year, and are having a hard time finding a place to put it all. So they put it in the market, and this herd effect causes even more money to flow in the periphery driving valuations to the astronomical highs that we're seeing. To further fuel this mania by offering 50% margin loans on equity assets possessing out of sight P/E is purely inexcusable. High equity prices on a few high-flying stocks has propelled much of the consumption demand that AG is fretting about. It would be a pretty simple thing to hike rates on margin and to to make it more difficult to margin high-P/E stocks. It certainly wouldn't hurt in forcing investors to broaden their investment choices and act like investors, not speculators. Regards, Ron

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