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Strategies & Market Trends : Value Investing -- Ignore unavailable to you. Want to Upgrade?

To: Arthur Radley who wrote (35107)	8/14/2009 2:10:14 PM
From: MCsweet	2 Recommendations Read Replies (1) \| Respond to of 78744

IMO, margin is speculative unless what you are buying on margin has very low volatility (such as a very high grade bond where you earn a spread on the margin) and/or has a guaranteed payout coming soon, or if you have very accurate hedges on. I think Graham might be ok with the use of margin in these types of instances. I think these activities are what he refers to in term professional. I don't think he is referring to sophisticated investors who are already fully invested in stocks, buying more of them on margin. In fact, he advocated not being entirely invested in stocks. Load and loads of "professional" investors have gotten blow up using margin. I don't trust myself to use it to any significant degree (unless again I have a hedged or low volatility opportunity), but then again I don't have much confidence that I can time the market. Also, smallcaps typically have plenty of juice such that I don't feed any compelling to crank up the portfolio's volatility with margin. MC

To: Arthur Radley who wrote (35107)	8/14/2009 7:36:31 PM
From: Madharry	1 Recommendation Respond to of 78744

I consider myself a speculator, one cant rely on any information one gets as being rock solid unless one is the ceo of the company and even then... I am speculating that the information i base decisions on is accurate and true, and now I am prepared to head for the hills at a moments notice when technical action indicates that it might be otherwise. I dont see how you can blame any part of the decline on individual investors. It seems apparent to me that the sharp declines were caused by the people who knew in advance that there would be substantial deleveraging and acted accordingly. I remember being very surprised when certain hedge fund managers came on bnn the canadian equvalent of cnbc and started recommending cash as a top pick. i had never seen that ever. clearly they had already been told that they would not be able to deploy the same amount of leverage that was permitted them in the past and the responded accordingly. Unfortunately once again this was inside information the public at large was not privy too until too late.