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To: Kevin Podsiadlik who wrote (119511)	3/6/2001 6:30:43 PM
From: Bilow	Read Replies (2) \| Respond to of 164684

Hi Kevin Podsiadlik; First of all, as I showed in the previous post, that book was (1) not by Jesse Livermore, nor endorsed by him in any way, but simply rumored to be a biography based on his life, (2) fictionalized, (3) not by a particularly trustworthy author. With this many problems with the source, why are you quoting it? Who knows what the truth was. Go find a real source, the "Jesse Livermore" book is a novel. But there is another side to this that I agree about with you. If I recall, Jesse was more or less a daytrader, not a buy and hold type. The 50% margin requirements are typical for long term traders, high speed professional daytraders trade with much lower margin requirements, even nowadays. The reason is a matter of risk management that is too complicated to explain easily here, but the low margin requirements for professionals doesn't have much to do with the margin requirements for mom and pop who show up at a brokerage and want to make an investment for their retirement. A brokerage does (and did) have a reason to loan money to traders like Jesse Livermore, as opposed to the long term traders. The reason is that high volume traders generate lots of commissions. For this reason, and also because of the risk management stuff, it is the case that brokerages are more likely to give better margin terms to high speed traders. It is also the case that at a brokerage like the one the fictional Jesse was talking to the fictional owner of, there would be a very close watch kept on the positions of the traders. Readers who have never traded at a daytrading center have no comprehension how little privacy there is at one. All the traders know what all the other traders are buying, how much money they have in their accounts, and so does management. When mom has a trading account with Schwab, no one notices when she puts $50,000 into ETYS at $0.50 on 50% margin. Hence, disaster. Try that stunt at a daytrading firm and the owner (or "24") will be telling you to get it off your screen immediately, as you are putting their money at risk. Some of the modern daytrading firms give 10% margin to their traders. (Over night margin requirements are still at least 25% though, the 10% figure applies only to intraday margin.) In order to do this, they have to organize the firm as a sort of partnership. The same thing applies to traders who trade the firm's capital at daytrading firms. One other reason for the better margin is the closer control that the brokerage has over daytraders. Regular moms and pops are all the time going off on vacation with dangerous positions in their accounts, but daytraders are supposed to be there at all times of the day. Consequently, margin calls can be dealt with quickly. But the basic thing to note is that it isn't daytraders (who by definition do not take position home overnight) who ran the stock market up into the stratosphere, and it is not daytraders who are getting killed in the recent decline. In fact, all my daytrading buddies are doing rather well with the recent increases in volatility. They generally try to avoid being long or short in the long run, and only make money on the small movements. Instead, it is the people and companies that carry around huge inventories of stocks that are the cause of the market getting out of synch with the reality of the underlying companies. -- Carl