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Pastimes : Ask Mohan about the Market -- Ignore unavailable to you. Want to Upgrade?

To: Monty Lenard who wrote (9780)	11/29/1997 9:34:00 PM
From: Bilow	Read Replies (1) \| Respond to of 18056

Hi TCLAUDE; Loved that link to the headlines. The guy who put them into HTML used fonts that gave me goose bumps. But regarding: Using the example of RCA, a Mr. John Doe could buy 1 share of the company by putting up $10 of his own, and borrowing $75 from his broker. I understand this didn't happen. Note that one of the headlines in your link noted that none of the brokerage houses actually lost money on margin loans. The reason was that even though they could legally get by with whatever margin they wanted, in practice they required 45 to 50% margin just as today. I typed in a quote from Galbraith, pretty much the popular expert on the 29 debacle some weeks ago. Here is a link to the quote: Margin Requirements in 1929 not 10% as rumoured: Message 2671500 On the other hand, mutual funds back in the 20s were allowed to issue bonds. Consequently, a small investor who wanted a lot of margin would buy mutual fund shares, which were traded just like stocks. The mutual fund could have $100 worth of stocks, and $90 worth of borrowed money, so this way the investor could (indirectly) borrown 90% of his stock purchase. These mutual funds went from prices in the hundreds of dollars per share to zero in a matter of months. This is well documented in Galbraith's book. Of course the mutual fund stock price was typically more than the book value. Sort of reminds one of Warren Buffet's Bershire Hathaway, but not as well run. -- Carl