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Pastimes : The Justa & Lars Honors Bob Brinker Investment Club -- Ignore unavailable to you. Want to Upgrade?

To: KurtSS who wrote (9312)	10/15/1999 11:38:00 AM
From: Ian@SI	Respond to of 15132

KurtSS "why doesn't AG simply raise margin requirements." Wouldn't this help quell "irrational exuberance" and therefore mitigate the severity of severe equity free fall? 1. Alan tailors his speeches to the audience in the room where he is speaking. Unfortunately, the media and the net give him a much wider audience or people with much less understanding. Very few of the comments that I've seen or heard since last night have come from those with even a minuscule understanding of the intricacies of the global financial system. Last night's direct audience has an indepth intimacy with that subject. 2. I don't know why Alan does or doesn't do anything. One would have to ask him for an answer to that question. But yes, I believe that Alan is asking the most influential people in the Financial Institutions that very question. i.e. - Wouldn't things be a little bit better if there were more reserves and a little less exuberance about equity values upon which loan amounts are based? And I have to answer that question in the affirmative. If individuals and institutions were less leveraged, they could better withstand any shocks to the markets, etc. The point is how aggressive or conservative should one be and be consistent with prudent financial objectives. There is no one answer that fits all. So it might make great sense for a young executive, with no obligations to be leveraged to the hilt. In my circumstances, [retired, with no desire to ever work for another company again] a somewhat more conservative approach might be most consistent with my current objectives. So why should Alan remove a degree of freedom from all. Rather, let the institutions tweak things a little independently of the fed and of each other. Your point is valid. If there were no margin whatsoever, then an equity free fall would pose no risk to the institutions, liquidity or the economy. If every investor is "margined to the max", then a minor equity fall could easily produce a downward spiral with severe repercussions on the institutions, liquidity and the economy. We're somewhere between those two extremes. Alan was merely asking those who could most influence where the pendulum actually is, "Are there benefits from a somewhat more conservative stance?" And it's a very legitimate question to be asked. Those that can't handle it, shouldn't read speeches not targeted directly at them; nor listen to some talking head misinterpret it. JMHO, ;-) Ian.