To: robert miller who wrote (2825 ) 5/14/1999 12:22:00 PM From: michael r potter Read Replies (2) | Respond to
Robert, your timing seems pretty good from the past posts you have made. Days like this are good from the standpoint of carefully monitoring the recent leaders. If they can hold most of their gains during the next few days, they might be worthwhile buy candidates for the subsequent rally phase. So far, Southwest Securities SWS is only down a point after very large recent gains. SFE is so far not giving back very much considering the quick $24 run-up. Dow and Georgia Pacific +$3 look good. I am sure there are many others. MSFT continues to look very poor, as the recent rally was weak, barely getting above the point where it broke down [$80], and quickly falling back. This LINUX software is a real potential thorn in its side. LINUX is not only good, it is free. Tough to compete on price. Re: Bonds, obviously, 6% is no help to high PE stocks. 5.9%, getting close. No time to be strung out on margin-that should be very obvious. In fact, not a bad time to have some built up cash.- OT-RE Margin. When in New York a few years ago, I was walking down the street when I came upon two young very street savvy young black men. They were sitting at a small table playing a shell game with passers by. Three shells, one object, guess which shell contained the object. After they set it up, they asked someone in the crowd to pick the correct shell. One person guessed, and the shell was picked up-wrong. They turned to me, Which one? I picked the correct one and was immediately handed $20. I politely refused, mumbling something about not earning it. Inside, I was thinking that I don't know what is going on, but what are the chances of a guy from Oregon walking away with their money. They were not in the business of giving money to strangers. This reminds me of the market on margin for many of those new to the market the last few years. They have been handed a lot of $20 bills with apparently not much risk. BUT, what are the chances of them making it out of town with the accumulated profits. Sadly, for many very little. Margin is a drug. It is intoxicating while working and it has worked so well during the life of many new investors. Will they have the fortitude to get off and sit on cash when the inevitable @#$% hits the fan. No. It is normally a game that is played until it fails. There is no light that turns on over the market that says STOP, get off now. It truly is like a drug. The negative leverage of volatile stocks held in a margin account during a true bear market or heavin forbid- crash is breathtaking. The effect on emotions is simply overwhelming. So overwhelming that it often leads to paralysis, like a deer caught in the headlights, with a final emotion of panic, followed by margin calls. The question IMO is not if, it is when. This fall, next year, two years? No one knows, but that day is out there. The last two years is not market reality as history has ever defined it. Or it is market reality as seen historically as euphoria and mania, which inevitably ends whether it is tulips, real estate speculation like Japan, gold in the late '70s. Some will have made enough millions to bail out and set up a secure financial future, but far to many will be caught like deer in the headlights. Please, if loaded on margin, keep this in mind during the heady days when it seems like nothing can go wrong. Signed, former margin junkie. I crashed twice [slow learner], and still use a very small amount of margin from time to time. It took two painful lessons, and the drug is still there, but finally under control. Mike
