Fascinating Rande. They give you three days to borrow then push the market down 1-2 days more giving them the right to liquidate at low-low prices and scoop up those cheap shares.
They also do this to individual stocks. Not the brokerage houses but the MM's. I am amazed now by the fact that BEBE and ANF which I lost so much money on when they plunged from 28 - 9-10 are now almost back to their old prices. And almost NOTHING has changed. UIS was my other big loser (26-9 route) but I doubled up and am going to hang on now long-term because it's already 1/3 of the way back and was up nicely yesterday which leads me to believe the 20's will return soon. Will the same follow for NOVL, LOR, IFMX, CPWR and others which were wiped out 70%? Sure, is UIS can do it why not the others?
And now there are the telcos. Okay at least three was a semi-rational reason to push T down from 60-30, with 400 billion (or whatever the figure is) in debt buying the cable companies. But when WCOM and FON were just taken down we saw a blatant manipulation on the short side. There is no way WCOM is a $30 stock in this market. Thank God SBC and VZ are going up amidst this. It leads me to believ FON, WCOM, LU and T will soon follow. And the big boys will have shaken all the weak hands and panic sellers out.
You do over-state though when you say one might be liquidated on the 4th day. I have been caught a few times but all I had to do was sell one stock, enough to last one more day and then then market would usually start recovering. I'd just sweat it out 1-2 days. Problem is a lot of weak hands panic and sell everything or even let themselves be liquidated. I would never let myself be liquidated. I would sell something myself first.
I saw myself in your warnings though a bit. I am now almost fully margined with about $5,000 breathing room only. Because yesterday I bought WCOM, LOR, CPWR, LU and FON. My logic was that these stocks "can't" go any lower (gut feeling) and have to start rebounding at least by Tuesday or Wednesday which would be the day of any margin call. But it makes me realize we do play with risk here. Still only by taking the risk can you reap the reward.
Buying at the bottom may seem risky but it's actually a lot less risky than buying near the top. Obviously.
Yes there is manipulation. But on the other hand maybe they have the right to squeeze us if they're willing to let us play with their money. It's true I have about $100,000 credit to buy stocks with Fidelity which isn't mine. It's the house's money right? |
