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Strategies & Market Trends : Currencies and the Global Capital Markets

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To: TimbaBear who wrote (2381)	1/15/2000 11:26:00 AM
From: Hawkmoon	Read Replies (1) of 3536

So, would you limit the high P/E margin restrictions by industry? I don't see why we should discriminate. A hypervalued stock is a threat to the nation's financial stability when it is juiced up with even more millions of juiced up debt. All I think we should expect is a rationale and prudent risk-management criteria being implemented that assessing the proper amount of risk premium and collateral requirements to the risk of a particular loan. And I fully understand that brokerages claim that the margin loans provide them the ability to sell off your stocks to meet a margin call, so that is technically the "ultimate" in safety. However, when the market is driven higher by such a high overall percentage of margin debt outstanding, it increases the risk of a domino-style market sell-off as margin call after margin call are reduced by selling off stocks. Increasing the margin rate when the overall level of margin debt becomes excessive is a prime disciplining measure in preventing over-speculation using someone else's money. Regards, Ron

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