To: Bretsky who wrote (20892 ) 3/21/2000 9:49:00 AM From: DownSouth Read Replies (3) | Respond to
Thanks, Bret. I thought this paragraph was of particular interest. It helps explain the fast fall of NTAP and others last week:But this kind of free fall in the prices of stocks that have zoomed the fastest and farthest is exactly what you should expect in the current market. Margin debt is at record levels, and that means that many of the investors who own these highfliers have bought them with borrowed cash. Since those loans are secured only by the value of the stocks themselves, when the market heads down, the collateral on the loans is no longer worth enough to secure the loan. Then brokerage firms send out margin calls. Investors don't have much time to meet a margin call -- just until the end of the day. And very few investors cough up new cash, choosing to sell some of their shares instead. The result is massive, forced selling into a falling market, which triggers more margin calls. No wonder that in a market with such high levels of margin debt, declines are steep and fast...
