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Strategies & Market Trends : Waiting for the big Kahuna -- Ignore unavailable to you. Want to Upgrade?

To: GROUND ZERO™ who wrote (45720)	1/26/2000 8:37:00 AM
From: long-gone	Read Replies (1) \| Respond to of 94695

"They" are afraid, "they" are VERY afraid: Tuesday January 25, 2:45 am Eastern Time SEC Head Warns Mutual Fund Buyers By MARCY GORDON AP Business Writer WASHINGTON (AP) -- It's the kind of TV ad that attracts attention: A tow-truck driver trades stocks online with a big brokerage firm and makes enough money to buy his own island. One person who was watching was the nation's top securities regulator, Arthur Levitt, who publicly criticized such ads last spring, saying they held out unrealistic promises of quick riches. Now Levitt, chairman of the Securities and Exchange Commission, is turning his attention to mutual fund ads that boast triple-digit returns. The ads ``play to people's emotions rather than their intellect,' Levitt said Monday in an interview with The Associated Press. He decried a recent proliferation of advertising by mutual fund companies promsing huge(cont) biz.yahoo.com

To: GROUND ZERO™ who wrote (45720)	1/27/2000 12:56:00 AM
From: Lazarus_Long	Read Replies (1) \| Respond to of 94695

Greenspan hints at margin increase: From The Wall Street Journal: January 27, 2000 Greenspan Says Fed Considering Action To Curb Borrowing for Stock Purchases By JACOB M. SCHLESINGER and YOCHI J. DREAZEN Staff Reporters of THE WALL STREET JOURNAL WASHINGTON -- U.S. Federal Reserve Chairman Alan Greenspan told lawmakers that he is increasingly worried about the recent surge in borrowing to buy stocks, and said for the first time that the central bank is considering acting to curb the trend. Mr. Greenspan, speaking before the Senate Banking Committee, reiterated his longstanding opposition to raising so-called margin requirements, which limit the amount of money that an investor can borrow from a broker. But when pressed by New York Democratic Sen. Charles Schumer, the Fed chairman acknowledged that officials "have also been discussing what alternatives that there are." Mr. Greenspan added, "I don't want to suggest that we're about to do anything at this stage, but I would confirm that we obviously are doing a good deal of thinking about this whole process." Mr. Greenspan didn't elaborate on what possible actions were under consideration, and other Fed officials refused to discuss what the options were or how seriously action was being considered. Few Alternatives Independent experts said the Fed doesn't have many alternatives within its direct power to curb margin lending since it doesn't regulate securities firms or stock exchanges. But Mr. Greenspan implied that the Fed was working on the issue with the U.S. Securities and Exchange Commission and the Commodity Futures Trading Commission, which can prod the exchanges to clamp down. Late last year, the New York Stock Exchange and National Association of Securities Dealers jointly approved tighter margin requirements on "day traders," investors who buy and then sell the same stock quickly, but left unchanged the limits for other traders. Mr. Greenspan made the remarks during a hearing held to consider his nomination to a fourth four-year term guiding the nation's monetary policy. The banking committee will vote on the nomination Tuesday morning, with a vote by the full Senate expected later that day. The 73-year-old Mr. Greenspan enjoys broad bipartisan support -- he didn't field a single critical comment at the largely laudatory session -- and is expected to be confirmed by an overwhelming majority. Few Interest-Rate Hints Financial markets were closely watching Mr. Greenspan's appearance, which was televised live on many cable-TV networks, for any clues about how aggressively the Fed will raise interest rates in the coming months. However, he shed little new light on that topic. The Fed is widely expected to raise rates by a quarter of a percentage point when policy makers meet Tuesday and Wednesday, and the Fed chairman said nothing to counter that impression. But his opening remarks were silent about the state of the economy, and few of the questions from the senators broached the topic. The politicians were largely interested in drawing Mr. Greenspan into the intensifying political war over how to divvy up mounting surpluses. The Fed chairman reiterated his long-held view that his first priority would be to allow as much of the surplus as possible "to flow through into a reduction of debt to the public." But he refused to be maneuvered by Democrats into saying that Republican plans for a big tax cut would force the Fed to raise rates. The most significant new statements Mr. Greenspan made were his comments about margin debt. He didn't raise the topic, but was drawn into a discussion of it by Mr. Schumer, who has close ties to Wall Street. Mr. Schumer noted a recent jump in margin debt and said he had "talked to a lot of people in the markets, and they're very troubled by this." Speculative Bubble Indeed, stock-related borrowing has risen sharply in recent years, and more and more economists are worried that such debt has been fueling a speculative bubble. Through much of last year, Fed officials dismissed those worries, noting that the level of debt had risen largely in line with the value of the stock market. But in the last two months of 1999, margin debt surged even faster than the rallying stock market. Such borrowing at New York Stock Exchange member firms shot up 25% to $229 billion in November and December, according to NYSE figures, while total market value grew by just 11%. The latest numbers "have caught our attention" and have triggered "considerable conversation" among regulators, Mr. Greenspan said to Mr. Schumer. "You're worried about it, it's fair to say?" Mr. Schumer asked. "Obviously, because if we weren't worried, we would not be engaged in trying to understand ... what it means," Mr. Greenspan responded. Despite his concern, Mr. Greenspan once again ruled out the Fed's most obvious tool for curbing stock-related borrowing, granted in the wake of the 1929 stock-market crash: to raise limits on the percentage of a stock's value an investor can borrow to buy that stock. The current margin limit of 50%, which allows an investor to borrow from a broker half of a stock's value to buy more securities, hasn't been changed since 1974. Mr. Greenspan said "there's no evidence to suggest that changes in margin requirements ... had any effect on prices." In addition, he said such a change would be unfair, because it would largely hit small investors who have few alternatives to credit, while larger investors would be able to circumvent the rules. "We have been quite reluctant to see restraints on specific individuals and not others," Mr. Greenspan said. --Greg Ip contributed to this article. Write to Jacob M. Schlesinger and Yochi J. Dreazen at jacob.schlesinger@wsj.com and yochi.dreazen@wsj.com