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Strategies & Market Trends : Waiting for the big Kahuna -- Ignore unavailable to you. Want to Upgrade?

To: Mama Bear who wrote (36581)	1/20/1999 11:57:00 PM
From: glen	Read Replies (1) \| Respond to of 94695

Perhaps it's back to Datek for a back-up account.

To: Mama Bear who wrote (36581)	1/21/1999 12:52:00 PM
From: FR1	Read Replies (4) \| Respond to of 94695

I know you had plenty of available margin, but Waterhouse has put a 100% margin requirement on these shares.. Yeah, I've been following the margin deal too. I sold out of my internets even though I wanted to hold them because you can't fight city hall (unless you can afford to sue them). The fed calls have not changed but the exchange is pushing brokerage houses to tighten up their credit to slow down margin buying in unfavored stocks. House calls are up to the brokerage houses and vary wildly. Someone also pointed out that the brokerage houses are under pressure from larger clients to come up with a way to divert more money to them and not let most of the new money go to "Internet" stocks. I use Fidelity and Dreyfus for most of my trades. Fidelity overnight jerked their margin requirements on most internet stocks up to 80% and lowered the margin on some other stocks to as low as 30%. I don't like this. Dreyfus treated me like an adult. They simply told me that 50% margin, which was sometimes winked at in the past, is now a dead serious limit and I just needed to treat it with respect. If I get close to 50% I will get a house call. I said fine and respected them for what they are doing. Here's a real conversation I had with Fidelity that demonstrates why I don't like what they are doing: Me: I am holding YHOO, the stock is going up, and I just got a house call. I don't see how this can be. Our margin agreement is 50% and I am well above that. What is going on? Fidelity: Yeah, we changed the margin requirements overnight. Now it's 80%. We just want to protect against sudden falls. Me: OK, how about this - I will buy more at-the-money puts than I have stock. That removes all the risk for this stock. It is now below zero risk. If the stock goes down one dollar we will make big money all the way down. How about that? Fidelity: No. Can't do it. Me: What about IBM? Fidelity: Oh, that's a good stock. You can margin up to 30% on that one. Me: So does this mean that Fidelity is now in the business of stock picking for it's customers? I mean, is Fidelity, which has never been known as a first rate predictor of stocks, now going to give more of its investors money to stocks it likes and less to ones it does not like? Isn't that a little unfair diversion of capital? Is it true that if I give you $100K you are now saying I can have margin to buy $70K worth of T but only $20K of ATHM even though T damn near owns ATHM, will never let ATHM die, and ATHM has better growth and professional recommendations than T? Fidelity: It's our money and that's how it is. Me: How do I know which are the blessed stocks and which are the damned? Do you have a chart on the web somewhere? Fidelity: No. You got to call us and ask us. It can change every day. Me: So every day, before I buy a stock on margin, I got to call you and see if it qualifies. Then, if it does qualify and I buy it, you may change the rules overnight and give me a house call? Fidelity: That's how it is. Me: I'm glad I only gave you a small part of my portfolio. I'll do most of my business elsewhere because I can't trust this situation. If I buy a stock, it goes up, and I intend to keep the stock because I don't want to pay the short term capital gains taxes, then this is not the place to be. Fidelity may change the rules overnight and sell it for me. I am sure there are a lot of people forced to sell stock now even though they do not want to and they are within margin limits agreed upon when they bought the stock. The final picture: An old lady has tons of T bought eons ago. She lives off it and can not afford to sell it. It is on margin but within safe limits. T goes up big (which it may). So Fidelity adjusts the margin up and then sells the stock for her and without her approval. I don't want to go there. You know, it almost seems like a class action suit is in the making. All buyers have to go through brokers and brokers are together diverting margin funds to favored stocks and away from stocks they don't favor. If I was branded with the scarlet letter "I" for internet I would sure want to howl for some kind of justice.