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Politics : Ask Michael Burke -- Ignore unavailable to you. Want to Upgrade?

To: Knighty Tin who wrote (88132)	1/8/2001 10:45:13 PM
From: mishedlo	Read Replies (1) \| Respond to of 132070

Mike - Why not PUTs on ENE? M

To: Knighty Tin who wrote (88132)	1/9/2001 11:31:52 AM
From: Dennis O'Bell	Read Replies (1) \| Respond to of 132070

But I would have thought the general fall of naz last year would already have more than sufficed to take out a major heavily margined player. I really feared this would finally happen as last year wore on. If I recall correctly, LTCG suffered very small "real" losses, in any case much less than the general haircut tech stocks have taken. Institutional use of derivatives strikes me as one giant gentlemen's agreement when in reality it's a form of legalized gambling casino. Does anyone know what the odds really are compared to Vegas? However I don't think derivatives are as bad as the under the table agreements among banks that take place globally. Because there are almost no rules in that case and bonne chance to anybody who wants to sort out anything that goes on. Countries like Switzerland or Luxembourg with "conservative" banking practices make a substantial amount holding laundered money. The US is really a model of transparency compared to most of the world. In fact we're pretty naive in many respects.

To: Knighty Tin who wrote (88132)	1/24/2001 7:12:34 AM
From: Bilow	Read Replies (2) \| Respond to of 132070

Hi Michael D. Burke; Back on January 8th, you were noting some differences between today and 1929, and you got them all wrong. This is not a common thing for you, so I thought I'd bring it to your attention. (G) (#reply-15146309) First of all, while individual investors are today limited in how much margin they can buy stocks on, it is not really true that in 1929 individuals could buy stocks on significantly lower margin. There are plenty of tales of 10% margin being allowed individual investors, but these were always special cases. For the brokerages to give 10% margin to the general public would be as silly then as it would be now. Brokerages only loaned more if they believed that the loanee was good for the money. In a way, it's similar to the 100%+ loans you can now get on your house. The collateral for the (last 10% of the) loan is not your house so much as it is your good credit. Actual figures would show that only a tiny amount of margin money on Wall Street in 1929 was loaned at the lower margin rates. After the market crashed, Wall Street had to find a story to sell stocks back to the public. The new 50% margin rule was one of those stories. The reason for the spreading of this exaggeration was to help convince mom and pop investors of the 1940/50s that the market couldn't possibly pull another big crash. Pointing to the SEC also helped here; the intention is to convince sheople to buy stocks, not illustrate the truth. The other thing you noted was that derivatives did not exist in 1929. This is untrue. Here is a reference to derivatives from 1891: The Art of Cross-Examination Francis L. Wellman (original copyright 1903) First Touchstone edition, 1997, p459 Chapter 25: The Cross-Examination of Russell Sage Mr Choate. "Oh, you are a money lender. You buy puts and calls and straddles?" The witness said that he dealt in these privileges. "Kindly explain to the jury just what puts and calls and straddles are," the lawyer said encouragingly. The witness answered: "They are means to assist men of moderate means to operate." Mr Choate. "A sort of benevolent institution, eh?" Mr Sage. "It is in a sense. It gives men of moderate means an opportunity to learn the methods of business." Mr Choate. "Do you refer to puts or calls?" Mr Sage. "To both." Mr Choate. "I do not understand." Mr Sage. "I thought you would not" (with a chuckle). Mr Choate affected a puzzled look, and asked slowly: "Is it something like this: they call it and you put it? If it goes down they get chargeable benefit, but if it goes up you get it?" Mr Sage. "I only get what I am paid for the privilege." Mr Choate. "Now what is a straddle?" Mr Sage. "A straddle is the privilege of calling or putting." "Why," exclaimed Mr Choate, with raised eyebrows, "that seems to me like a game of chance." Mr Sage. "It is a game of the fluctuation of the market." Thought you would love the reference, what with the general public being vaguely worried about options 110 years ago. Things have changed since the 19th century, but they haven't changed nearly as much as people think. And most people still don't know what a straddle is. The book is a fascinating compendium of late 19th / early 20th century court cases. The case cited involved Mr Sage being sued for getting someone else to stand as a shield between himself and a suicide dynamite bomber. The bomber killed himself, and severely wounded the shield, who then sued Mr Sage 4 times. Another case of the more things change, the more they stay the same, both the stuffed up legal system and suicide bombers. -- Carl