Silicon Investor (SI) -- The First Internet Community

STOCKTALK

We've detected that you're using an ad content blocking browser plug-in or feature. Ads provide a critical source of revenue to the continued operation of Silicon Investor. We ask that you disable ad blocking while on Silicon Investor in the best interests of our community. If you are not using an ad blocker but are still receiving this message, make sure your browser's tracking protection is set to the 'standard' level.

Technology Stocks : Intel Corporation (INTC) -- Ignore unavailable to you. Want to Upgrade?

To: jackrabbit who wrote (101510)	3/24/2000 10:34:00 PM
From: exhon2004	Respond to of 186894

John: re >>Yes I have heard of it, but have never used it much. Do you have a reasonably conservative strategy??<< I believe Carl's "conservative" strategy is to make so much money that if he lost 95% of it he'd still be rich. Regards, Greg

To: jackrabbit who wrote (101510)	3/25/2000 1:14:00 AM
From: carl a. mehr	Read Replies (2) \| Respond to of 186894

John, I have flirted with margin and twice come too close for comfort. I am pondering what I can say worth passing on. I have certainly learned a lot and I am lucky to have survived the gamble. I still gamble, but I am much more cautious. When you keep borrowing more and more money against a rising portfolio, the equity value of the portfolio may often takes on a parabolic rise. From a low in the Spring of 96 to a high in the Fall of 97 (about 18 months) my portfolio had risen 800% and that was basically done on a single stock, namely Intel. Then market dropped and huge margin calls came! When the smoke cleared the high point achieved was reduced to less than 1/3. Not really too bad when I could have been totally wiped out.Living on the edge is so much fun! What was learned? The biggest problem I discovered was that the broker had extended too much credit. (I was traveling and simply relied on broker for spendable margin money). I was allowed to borrow 60 cents against every 40 cents of equity. When the market turned down in the Fall of 97, I had a portfolio equity value of 14.5(AddZeros), but my margin indebtedness was 20.5(AddZeros). Rule #1 don't ever accept more than 50% margin, but that also depends on what kind of stocks you hold. If I held a stock like AMD I wouldn't borrow any money. Rule #2 Spread the risk over at least 3 solid growth stocks. In addition to Intel, I now have Cisco and Microsoft You may ask how has margin served you. From the near fiasco that occurred Aug 31, 1998 and the month that followed, my portfolio has risen 1100% to its current value. It was done with the 3 Gorilla stocks and 50% margin during the first 12 months of this 18 month boom period. I have been healed and now have a safe portfolio with a mere 33% margin. Summary: With the wild swings my portfolio have taken I am pleased that I can claim a 76% compounded annually portfolio return for the last 9 years. This is really nothing spectacular. Equal market baskets of Intel, Microsoft and Cisco during any of the last 10 years would have yielded approximately 70% compounded annually. Yes, without margin you can make big money safely. With safe use of margin a yearly double...humble wiser carl