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Strategies & Market Trends : Gorilla and King Portfolio Candidates -- Ignore unavailable to you. Want to Upgrade?

To: Tom Trader who wrote (23068)	4/19/2000 10:02:00 AM
From: saukriver	Respond to of 54805

On Margin Debt and Mixed Metaphors Not sure I could ever follow someone who recommended margining to the hilt, even if they happened to get lucky recommending dialing the the dosage back right before last week's crash. (It also sounds like a lot of work to follow such a strategist.) I think several recent posts--e.g., BB's last post on the key ingredient of time--agree that judicious and quite careful use of margin has a place for some investors. (Others on this thread are in the "just say no" camp, believing that any use of margin is foolish.) I am not in that camp and believe that margin is a tool that must be used with extreme caution. The risk of not using margin is that your portfolio may not grow quite as quickly in a bull market as it might with the margin steroid. The risk of using margin is that you may not have a portfolio. Chaz's analogy of a power tool is a good one, too. It can help you get the job done more efficiently, or it can--if misused--slice off your hand and leave you with a bloody hemoraghing mess. Each investor has to weigh those risks for themselves (e.g., owning stocks that climb 50% instead of 100% in an a banner year v. not owning stocks). So, whether you use the drugs metaphor or the power tool metaphor, I am sure you can agree that we have mixed metaphors on this thread. saukriver

To: Tom Trader who wrote (23068)	4/19/2000 10:05:00 AM
From: Mike Buckley	Read Replies (3) \| Respond to of 54805

I think that the risk in the use of margin lies in its misuse. I think the same can be said of almost anything, including investing. I don't personally advocate use of margin, but consider this scenario over a very long period: 1) a minimal use of margin that never gets near the quantity that would force a margin call, 2) a consistent use of margin that remains the same percentage of the portfolio come hell or high water, 3) decades-long portfolio returns that exceed the interest rate on the margin loans. Using the above scenario, it would be very, very difficult to refute the use of margin. Ironically, the reason I and others in the folder caution against the poor use of margin is because the people who need to see our cautions the most typically are the ones who heed them the least. The people who need to see the cautions the least (or not at all) are typically the ones who heed them the most. --Mike Buckley