Thank you, Huey, for the Barron's article's full text..a courtesy to those of us without a subscription. Moral suasion is certainly working, many of the houses have thghtened their margin requirements on individual issues, and some have declared many stocks simply no longer marginable at all. I have noted this in my own account at Datek since mid February.
Since I'm a proponent of responsible margin use, an investing tool in my view, any change in the present 50% equity rules would both hurt and help me. Does anyone know, are the fund permitted to use margin? If so, do they and to what extent. The question is not idle.
In the whole market, funds control the bulk of the money, and if (tighter margin requirements) dry up their source of investing (borrowed) capital, I cannot believe it would not drive prices down, at least in the short term. I also believe, after the initial shock passes, we'd return to much of what we have now, but perhaps at a slower pace.
Other views?
Chaz |
