Sans,
Let's take another look at that. In case you didn't notice, Margin debt in the US just hit another all time high, about 450 BILLION of loans.
Alan Greenspan is very concerned, as is the US Congress, that this is becoming too much. I think what's going on is tacit capitulation by large firms to raise requirments on stocks that are volatile, or high priced. I've seen it at Fidelity, too.
I don't use margin often or for long, however I do know this: Any hint from the fed chairman, or more serious sable-rattling of changing margin requirements (ie tightening) will create a stampede of large proportions as positions MUST be liquidated. I don't need to tell you what' that would do the "golden goose", do I? <G>
That's why he won't publically do anything, but lots of private actions such as just what you mentioned will be used to attempt mitigate the margin problem, and get it to slow.
Raising interest rates also helps, as margin money gets more expensive, but that more trickle down reasoning. Many won't curtail their borrowing for 25 basis points more. However, if the margin requirments are increased, then that makes you come up with more of YOUR own cash.
Steve |
