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Strategies & Market Trends : Currencies and the Global Capital Markets -- Ignore unavailable to you. Want to Upgrade?

To: Sam who wrote (2372)	1/14/2000 7:31:00 PM
From: Hawkmoon	Read Replies (1) \| Respond to of 3536

I have in mind here my own belief that raising margin rates would be a much method of affecting equity capital than raising rates. By reducing leverage in the capital markets,........., .... would help to deflate the equity bubble that exists. I agree whole heartedly Sam. Raising real rates of interest is like the tail wagging the dog. The issue is that Americans are making a lot of money each year, and are having a hard time finding a place to put it all. So they put it in the market, and this herd effect causes even more money to flow in the periphery driving valuations to the astronomical highs that we're seeing. To further fuel this mania by offering 50% margin loans on equity assets possessing out of sight P/E is purely inexcusable. High equity prices on a few high-flying stocks has propelled much of the consumption demand that AG is fretting about. It would be a pretty simple thing to hike rates on margin and to to make it more difficult to margin high-P/E stocks. It certainly wouldn't hurt in forcing investors to broaden their investment choices and act like investors, not speculators. Regards, Ron

To: Sam who wrote (2372)	1/15/2000 10:19:00 AM
From: TimbaBear	Respond to of 3536

I'm just now catching up on the reading and this aspect of your post may already have been addressed, if so, please accept my apologies. Regarding raising margin requirements....what's your target audience?....is it to stop hedge funds?....then wouldn't options be the place for regulatory ammendment?....Is it to stop speculating by big mutual funds?....How much do they do via margin accounts?....Is it to stop the small investor from taking risk to extend returns?....How much impact would margin requirement change have if only applied to that segment? I think the only effective way to curb speculation would be to drain liquidity....this is done outright by the Fed physically taking money out of circulation; it is also accomplished discretely by allowing alternate investments to become attractive, say, bonds yielding attractive rates. Also, I believe that the speculation in the market is due to the potentials for both global market reach and increased margins offered by technological advances....these potentials have their own force of attraction that will cause circumnavigation of unduly restrictive policies, thereby weakening the positions of the policy-makers and enforcers....it is better to step carefully here...IMO