Is it just me? I noticed that just recently several brokerage houses have changed their margin requirements due to some change in regulations. For example, at Fidelity they have decided the house margin requirements for internet stocks like AMZN, YHOO, LYCOS, etc - are bumped up to 70%!! While other stocks, like DELL, IBM, etc are solid bets and good down to 30%!!
This means that a lot of people are getting margin calls on portfolios that are going up. I have some internet stocks at Dreyfus and got a margin call even though the stocks have done nothing but gone up.
When I asked Fidelity which stocks have what margin requirement they said you had to call and ask. It sounds like it is all tied to the premium and is designed to discourage irrational exuberance in internet tech stocks.
This doesn't sound good at face value. I always thought that if you kept yourself at around 50% margin, did your homework and invested correctly, you would be rewarded. Now it sounds like if you keep yourself at around 50% margin and you invest correctly you will get a margin call - because your stock will go up, the premium will go up and your margin requirement will go up. Especially bad news for people that have been holding good stock with a steady appreciation for a long time. If the stock suddenly starts to move they will be forced to sell and pay the capital gains.
Somebody tell me I got it wrong. It just doesn't sound fair. It seems that the margin requirements should be at X% and all stocks treated equally. The market will reward the winners and punish the losers. It's not up to NASDAQ, or somebody, to decide which stocks are favored. |
