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.

Strategies & Market Trends : MARKET INDEX TECHNICAL ANALYSIS - MITA -- Ignore unavailable to you. Want to Upgrade?

To: marginmike who wrote (2933)	5/16/2000 1:20:00 AM
From: LBstocks	Read Replies (1) \| Respond to of 19219

Margin Debt Fell Almost 10% in April, Marking the First Decline Since August By RUTH SIMON Staff Reporter of THE WALL STREET JOURNAL The stock market's turbulence in April may have sobered up some investors who have been buying stock with borrowed funds. Margin debt, which has been soaring, fell nearly 10% during the month. The drop marks the first time since August that investors pruned their debt loads. Investor borrowing reached record levels in recent months, drawing the scrutiny of securities regulators who viewed it as a sign of the market's speculative fervor. But until recently, most investors ignored red flags raised by regulators. "The bottom line is that investors got their fingers burned during the recent market downdraft," says Morgan Stanley Dean Witter & Co. analyst Henry McVey. "The good news," he adds, "is that you've had this major retrenchment in margin debt ... by and large without any major blowups to date." Figures released Monday show margin loans fell 9.6% to $251.7 billion in April among New York Stock Exchange-member brokerage firms. That was a sharp turnaround from March, when investor borrowing climbed 5% to a record $278.5 billion. The drop isn't all that surprising, however, given last month's sharp fall in stock prices. Many investors were forced to come up with additional cash or stock to meet margin calls; others had their stocks sold without notice as falling share prices eroded the value of their holdings. "If April wasn't down, that would be a real shock," says Sanford C. Bernstein & Co. analyst Steve Galbraith. Margin debt also fell as a percentage of total stock-market assets. Margin debt now accounts for 1.44% of total market capitalization, according to TrimTabs.com, which tracks the flow of money in and out of securities markets. That is down from 1.54% at the end of March and 1.53% at the end of February. Investor borrowing remains well above January's levels, when it stood at $243.5 billion, or 1.41% of total market capitalization. Margin debt was just 1.38% of total stock-market assets in September 1987. The decline in investor borrowing was sharp at some online firms. At Datek Online Holdings Corp., margin debt fell about 20% in April and "looks pretty flat in May so far," says spokesman Mike Dunn. Margin debt also fell about 20% in April at Ameritrade Holding Corp. and is up about 1% or 2% so far this month, a spokeswoman says. About 80% of the decline is due to customers voluntarily cutting back on their borrowing, she adds. Patrick Di Chiro, a spokesman for E*Trade Group Inc., says margin-debt levels at his firm declined "between 10% and 14%" from the end of March through Monday. "May has stayed pretty stable," he adds. Some brokerage firms continue to make it tougher for investors to borrow to buy stock. TD Waterhouse Group Inc. plans to increase its base margin-lending rate to 35% from 30% on June 15. "We think the change is prudent and we think it protects customers, in light of the current volatility we're seeing in the marketplace," says TD Waterhouse spokeswoman Melissa Gitter. The online broker now has more than 800 stocks subject to higher margin requirements, up from 443 on April 13. Write to Ruth Simon at ruth.simon@wsj.com