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Strategies & Market Trends : Bob Brinker: Market Savant & Radio Host
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To: MrGreenJeans who wrote (5088)5/21/1998 10:21:00 PM
From: wooden ships  Read Replies (1) of 42834
 
In re: <>"It's not really a healthy thing for a large number of
stock owners to believe they'll average 30-percent returns
on their securities for the next three years ... as they did in
the past three years," Samuelson said. He added that raising
margin requirements for stock ownership may be a good idea.

"Greenspan did not want to do this because he believes that
things have unintended consequences,'' Samuelson said. "He's
afraid that if he raised margin requirements, this could kick
back in the opposite direction (bolstering investor confidence)."
[italics mine]<>

Brinker has more than once advocated that Greenspan should raise
margin requirements from the current 50 per centum on eligible
equities if he(Greenspan) believes the stock markets are flooded
with "irrational exuberance." Brinker seemed at a loss to explain
why the Fed chairman should not avail himself to this particular
option within his arsenal as a sensible means of cooling specula-
tive fervor among traders whilst not damaging the economy in
the main. Samuelson appears to provide a direct insight into the
intriguing rationale why Brinker's suggestion to Greenspan goes
unheeded.

If I understand this correctly, Dr. Greenspan seems to fear that
raising margin rates will send a perverse message to investors
that, baseless speculative fervor having been wrung from the
market with a healthy margin rate increase, stock buying and
ownership would then be thought to carry even less odor of risk.

Mr. Green Jeans, thanks again for a very insightful and useful
cross reference.
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