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Strategies & Market Trends : Mr. Pink's Picks: selected event-driven value investments -- Ignore unavailable to you. Want to Upgrade?

To: Land Shark who wrote (14982)	3/14/2001 4:04:11 PM
From: AJ Berger	Respond to of 18998

A simple test on Buying more on the way down When my $20 stock goes to $15, and then to $10 as so many have on Wall St. these days, each time I consider buying more I close my eyes and ask myself; Could I be buying this stock here and now on the merits? Or am I trying to vain to recoup losses from a previous purchase. If I were to anyway establish a new position here and now, regardless of already having shares at a higher price, then I would still be a buyer. If my gut tells me that I'm worried, and only trying to recoup losses, then not only do I walk away, but I would even explore selling at least half of that original position to limit loss. Avoiding margin in these volitile markets is always the best idea. I always said if last year Greenspan would have fought the markets "irrational exuberance" with severe and mandatory margin loan restrictions, instead of interest rate hikes, we probably would not be in the current market mess were are in now. (All Greenspan did last year was warn major Margin lending institutions, that if they got caught insolvent, the Fed would NOT bail them out.) Margin loan activity a year ago was growing exponentially, especially with the explosion of online trading for both retail and daytrading hobbiest. I know guys who were 90% on some overnight systems! This was an obvious symptom of an overspeculative market. Personally, I never margin more than 33%, accept when I'm short with 50% exposure. Also, I've learned that if you ever get a margin call, it does not mean you should feed your position more cash, it means you fncked up, and should close that position!