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Politics : Formerly About Applied Materials -- Ignore unavailable to you. Want to Upgrade?

To: Jacob Snyder who wrote (65048)	7/24/2002 6:15:45 PM
From: Sam Citron	Respond to of 70976

They think they are smart enough to Manage the Markets, powerful enough to Fix all potential Messes. The SEC regulates but does not presume to have the powers you suggest. Capitalism tends to give free reign to capital markets, which reflect many of the imperfections of the system. Even after the internet and telecom bubbles have exploded, and after Enron and other financial disasters have turned trillions of dollars in market cap to smoke, capitalists still believe that the market allocates capital better than even benign and enlightened government planners. Despite tendencies of markets to sometimes resemble casinos through the innovation of new financial instruments like derivatives, futures and options, the markets are still the nerves and sinews of the capitalist system. AG watches margin debt levels carefully and knows that the markets are very sensitive to changes in the required margin (currently 50%). Alan Abelson's column this week in Barrons quotes transcripts of Fed meetings where AG stated that we were in a bubble and that raising the margin requirements would be sufficient to restore the economy to sanity. I don't really expect humility to tiumph over the perpetual cycles of fear and greed that have propelled Wall Street since trading began by the buttonwood tree. Consumers are free to hang themselves with credit, if they are not careful in managing it. It is no different for investors. Other futures contracts, such as gold, copper and soybeans have required margin rates which are set much lower than the new stock futures contracts. Therefore it was probably hard to make a convincing argument that margin requirements on stock futures should be closer to the 50% level. It is thought that leverage is essential to the success of these new markets. But maybe they are not really so new and the markets are just becoming one big gambling parlor. Sam