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Strategies & Market Trends : MDA - Market Direction Analysis

SPY 670.31

-1.1%

Nov 6 4:00 PM EST

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To: Casaubon who wrote (65146)	12/24/2000 12:32:30 AM
From: marginmike	Read Replies (1) of 99985

Many people had paper wealth, and borrowed against stocks they owned. They would rather not sell the stock and pay taxes. The market then came down and those dollars that were borrowed against were gone. However the sale may have resulted in a net capital gain. IE: If you bought Qcom at 10 and rode it to 200 last year your 10k would be 200K. You borrowed 100K from that and spent it. Your stock is now worth 84K, and if sold in a margin call you now have a 80-100K tax bill leaving you in the whole for 16K, and that is not a CMGI situation. There are also many whom exersised options and owe money on that transaction at the exercise price. The stock however is not worth the exersice price, and you now have a tax bill. I posted a MSFT article where that is happening to MSFT employees earlyier today. Check it out.

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