Bob Brinker: Market Savant & Radio Host Message Board

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Strategies & Market Trends : Bob Brinker: Market Savant & Radio Host

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To: Tim Bagwell who wrote (21784)	10/25/2004 4:13:38 PM
From: Kirk ©	Read Replies (1) of 42834

Another oldie I'm especially annoyed at is the margin threshold and how that fueled speculation in the late 90's. Bobble just can't accept the fact that the Fed doesn't hang on his every tip like some neophyte followers. He still yammers on about this today ad infinitum. Greenspan address this before the bubble collapsed. Bob doesn't accept the valid answer. Greenspan said that the small investor uses margin and it was not a significant amount of the total. He said he could raise margin requirements but then the speculators would get a home equity line of credit or cash advances on credit cards to get the funds to invest. Think about it. Fools are easily seperated from their money so Greenspan was containing the damage to a few speculators who were wiped out when they got margin calls. (One of those is a good friend of mine who lost a fortune despite my advice to diversify and get out of margin account when we had a good profit taking rally in 2001. To his credit his house was 100% paid for and the kids college accounts fully funded with Berkshire Hathaway stock... so he survived to start another company... ) But this is not good radio... for Brinker to pretend to the old farts he can fool that he actually had the solution to save us from the Bubble is a far better way to sell newsletters. The bubble came about from over capacity built to fund growth that was not there. Mostly the telecom companies like WorldCom and some others that went under were showing "profitable growth" by lyign about he numbers. When these collapsed, the whole supply chain that was built in tech land to support this growth suddenly had too much capacity. It has taken years to burn off this capacity. Only recently Agilent (the old HP Test Equipment Company) reported that they are not seeing competition from the grey market since all the used gear is now bought, worn out or obsolete. Summary: They bubble didn't come from the 2% of the money in 50% margin accounts. Those who had margin calls would have used credit card cash advances or home equity loans if they didn't have margin accounts to raise perhaps even more money to invest.

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