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

To: Madharry who wrote (37997)	5/23/2010 2:25:02 AM
From: Spekulatius	Read Replies (1) \| Respond to of 78462

Madharry - i knew that the interactive brokers margin rate would come up. the problem with margin loans of course is that only liquid assets can be used and you need to have a lot of equity 30% and that can be changed on a whimp). Clearly GS could not finance itself through margin loans alone. Even the discount window which is open to many institutions can only be used with very high graded bonds (AA or better) as collateral, certainly derivatives priveat equity holdings and other stuff would not apply. I agree that the 5% number is high but not unreasonable so if non-liquid assets needs to be financed with a 10:1 leverage long term. Even a community bank cannot borrow at 1%, right now they pay more like 1.5%-2% to their customers blended and they need to run branches, provide checking services etc to their customers to get their deposits, while GS can borrow apparently hundred of billions for 1% blended. Anyways, I am not trying to be moralist here or bashing GS. I think the value thesis is correct if things stay like they are, but I do not think that this is a sure thing and neither is GS stock at this level.