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Strategies & Market Trends : Bob Brinker: Market Savant & Radio Host -- Ignore unavailable to you. Want to Upgrade?

To: Dr. Anthony Keyodo who wrote (5093)	5/22/1998 2:35:00 AM
From: wooden ships	Respond to of 42834

In re: "Would you explain again how someone can conclude that by raising margin requirements, investors might buy more? With what money?" Doctor, you got me on this one. Samuelson has given us a glimpse into Dr. Greenspan's mind in the instance of how he reasons that raising margin rates stimulates, rather than tames, an overwrought stock market. His thinking appears to be more labyrinthine than most of us could possibly imagine. It would appear to be a straight for- ward proposition: raise margin rates and cool off speculative fever. Brinker agrees; Samuelson agrees; most others probably would, as well. Not Greenspan, apparently. Samuelson seems to imply that Greenspan concludes that raising margin rates fuels investor perception of a speculatively tamed market and, hence, inspires enhanced bullishness, or some such thing. It would be interesting to view the data as to the subsequent effect of a margin rate increase upon hyperventilative stock markets of times past. Ecce mens Greenspani!

To: Dr. Anthony Keyodo who wrote (5093)	5/22/1998 7:02:00 PM
From: Gary D	Respond to of 42834

Re: ". . . how someone can conclude that by raising margin requirements, investors might buy more? With what money?" One factor behind rising stock prices would involve the buying out with money of those stockholders who don't believe their holdings are worth more. But another possible factor behind rising prices requires no additional money: if both buyers and sellers adjust their beliefs upward ("enhanced bullishness"), then prices can rise without significant volume or money changing hands. Perhaps this psychological effect is what Greenspan fears. Regards, Gary