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Strategies & Market Trends : MDA - Market Direction Analysis -- Ignore unavailable to you. Want to Upgrade?

To: Benkea who wrote (45447)	4/8/2000 7:11:00 PM
From: John Madarasz	Respond to of 99985

Consumer Debt and Bankruptcies It also worries me when I read stories about investors/traders borrowing off their credit cards or home equity or from friends to invest in the stock market. The shooting down in Georgia at an All-Tech daytrading firm is an extreme consequence of such borrowing. Less extreme consequences still bother me. One reason the Japanese banking institutions are in such dire straits right now is because they made ill-advised loans on real estate and stock market investments at the top of the cycle. If interest rates keep rising in the U.S. and the stock market falls, then consumer confidence will weaken, reducing the "wealth effect," and we should actually see the personal bankruptcy rates start to decrease as banks and financial institutions tighten up their lending standards and improve their collection procedures. I believe the chart above is showing the beginning stages of this event. I know this sounds backward or illogical, but this is the way the markets operate. If you invest in the stock market, it might be wise to pay attention to the charts shown in this column, as future developments may affect your investment portfolio stockcharts.com Regards, JM

To: Benkea who wrote (45447)	4/8/2000 7:12:00 PM
From: Joan Osland Graffius	Respond to of 99985

Benkea, >>And then there are those depositing credit card cash advances, loan refis, and 125% home equity line proceeds into their brokerage account and then margining THAT! Back in the old days, maybe the 70's, I watched an interview with a person who was on Wall Street during the 1929 crash and was still on Wall Street at the time of the interview. He was close to a 100 years old. When asked what was the most important lesson he had learned during his time on Wall Street and he answered margin debt. He almost got totally wiped out during the 1929 crash and said this lesson was critical to his long term success. He said he was one of the "very few" that survived. I will never forget the advise. Margin debt scares the "H" out of me. I am sure that we will go through the same lessons learned if it is true that people are leveraging credit to buy on margins. My cousin lives in silicon valley. She is a real estate agent and said that the only thing she heard during Tuesdays fiasco was these kids were petrified that their real estate would become worthless. They have bought the homes with stock options and depend on stock options for maintaining these high priced assets. I wonder if the banks have given them credit on the stock options. <ggg> Joan