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Politics : Ask Michael Burke -- Ignore unavailable to you. Want to Upgrade?

To: Ilaine who wrote (61255)	6/2/1999 12:31:00 PM
From: Freedom Fighter	Read Replies (1) \| Respond to of 132070

CB, Most people who are on margin right now do not understand the risk they are taking. They have limited investment experience. Those that are encouraging others to buy on margin shouldn't be giving investment advice. Even with reasonably positive assumptions about the future it's easy to demonstrate that stocks are presently discounting a rate of return that is LESS than the cost of borrowing on margin (for most). So it's already silly to be doing so. And you still have to pay capital gains taxes. Margin interest is not deductible against those gains. Only in very rare cases does it make sense in this environment. When you factor in that stocks are trading at around 50% above all time historical highs, being on margin is reckless beyond my comprehension. I feel less sorry for margin investors than I do for a guy who lost his job via downsizing and can't make his mortgage payments. Wayne

To: Ilaine who wrote (61255)	6/2/1999 1:14:00 PM
From: Knighty Tin	Read Replies (1) \| Respond to of 132070

Coby, Part of what you say is true. They borrowed money, but most can repay and had better repay or they will find their stocks and bonds sold to meet the margin call. They just are not meeting the collateral requirements of the firm. Few are actually wiped out when they get the call. Unlike the person who makes $15,000 a year and buys a $50,000 car, the folks who borrow on margin are often ignorant of what the risks are. They assume that because a Dell has gone up so much for so often, that it will continue to do so. Therefore, borrowing at 9% to make an extra 100% a year does not look risky. When they buy the car, they know they can't pay. When they buy Dell, they don't see it as a depreciating asset until it is too late.