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Politics : Ask Michael Burke
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To: Ilaine who wrote (61255)6/2/1999 1:14:00 PM
From: Knighty Tin  Read Replies (1) of 132070
 
Coby, Part of what you say is true. They borrowed money, but most can repay and had better repay or they will find their stocks and bonds sold to meet the margin call. They just are not meeting the collateral requirements of the firm. Few are actually wiped out when they get the call.

Unlike the person who makes $15,000 a year and buys a $50,000 car, the folks who borrow on margin are often ignorant of what the risks are. They assume that because a Dell has gone up so much for so often, that it will continue to do so. Therefore, borrowing at 9% to make an extra 100% a year does not look risky. When they buy the car, they know they can't pay. When they buy Dell, they don't see it as a depreciating asset until it is too late.
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