Well Vince, that is truly awful. In case number 1, I hope the person fully understood the risk of being margined to the hilt. In case number 2, I doubt seriously if it would have mattered whether it was only 10% on margin. They would still be up against it. NT, CSCO, JDSU are of course fine companies. But they were and are by no means underpriced. But it wouldn't have mattered if they had bought companies trading at book value. They are still down for the count right now.
Those are fine examples. I have heard similar stories from all around. Even been in the same positions. One rule. You don't borrow more, you don't get in deeper, you do reassess and lighten your portfolio. If you get a margin call it is generally wise to just go back to 100% equity, because 99% of the time you will be getting a second call soon.
Greenspan and the rate increases are simply misguided. And mistargeted. (But you better learn to deal with them) He is so far off base that I guess his next move will be to outlaw online investing because it has enabled the masses to cost effectively participate in the stock market and increase their savings, wealth, retirement funds, and to buy a few pleasures in life. Such a move or statement is no less ridiculous than the current interest rate increases.
I can hear it now, 'Individual investors cost effectively participating in daily market swings is inflationary. It adds excess demand to the equities markets as they build their savings and wealth. No, I am not specifically targeting the small online investor. But the $8 commission can no longer be. The Fed approved commission will be raised back to the old standard of $300 per trade. This will slow down the excess demand created by the free market and competition' |
