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Pastimes : Ask Mohan about the Market

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To: Zeev Hed who wrote (6828)	11/2/1997 1:48:00 PM
From: Cynic 2005	Read Replies (1) of 18056

Zeev, in 1929 the Feds were wary of the stock market bubble and the New York feds even suggested that they rise interest rates to cool the stock market. As usual, the pols opposed to that since they can't think farther than their next election. I don't think that the liquidity was a problem at the time of the crash. It was just that there are upper limits to what one can borrow. Sure, the margin was 10% in 29 and 50% now. But back then there were not so many innovative ways to borrow even for that 10% payment. Today, you can bring that 50% form your credit card, 2nd home mortgage etc and borrow another 50% to buy the shares of your favorite companies. I am not sure about the breadth of such problem but it is much deeper than the one in 1929 if the initial margin requirement is met with borrowed money. JMO. -Mohan

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