NASD warns of risks of buying on margin

http://seattlepi.nwsource.com/business/apbiz_story.asp?category=1310&slug=Investor%20Alert%20Margin

WASHINGTON -- Securities regulators are warning investors about the risks of buying stocks with loans from their brokerage firm, a practice known as buying on margin that recently has proliferated.

The National Association of Securities Dealers, the brokerage industry's self- policing group, issued an "investor alert" Monday on the risks of margin trading, in which investors put up the securities they are buying as collateral for the loan.

The arrangment can lead to margin calls, in which investors are asked to come up with more money to meet the minimum equity requirement of the loan or risk liquidation of their accounts, the NASD said.

Investors can potentially lose more money than what they borrowed or what they bought the securities for.

...more...

does this remind anyone of anything???

The Republican Twenties...

...buying stocks when a Republican is in the White House.

Hmmm...

What me worry! my only portfolio is virtual or is that mythical. Maybe this is the warning that there's more going on than just a JobLOSS recovery? Next pigeon (target) please - PULL!

Fucking buying on margin?!? :wtf: Don't people learn anything ever? In everything I've ever seen on the Great Depression, buying on margin has been given as the number one cause for the stock market crash.

What the fuck is wrong with people!!!!!!!!!

.......be very afraid!
What is happening? How could we get so screwed up in such a short period of time? It seems as though this joker in the White House is
purposely trying to ruin our country! What amazes me, is that people
still support him! Don't drink the water! They must be putting mind control drugs in it!!!!!:eyes:

People want to add hot stocks to their portfolio as quickly as possible.

Often, the stock flops, and they get a margin call that requires them to cough up some cash or sell some stocks to cover the cost.

Buy now, pay later (in more ways than one)

they've got to buy on margin to keep it up. With everything else they've got going on they're running out of cash.

There was quite a bit of margin (credit) buying during the big stock run-up in 1999.

People were 'gambling' on the internet bubble and felt that it was OK to, say, buy $20,000 in stock while putting up $15,000 of their own money and borrowing $5,000. This is 25% margin, because 25% of the money is borrowed. That is OK as long as the stock goes up or stays the same.

The margin problem has a way of growing when the market goes down. If someone is on 25% margin in a bull market, he can easily get to 50% if the stock goes way down. At 50% comes the margin call where the investor has to put up more money or else sell the stock at a big loss. Investors aren't allowed more than 50% margin - it's like a credit limit.

It's really easy to go broke using margin.

More info:
http://www.investopedia.com/university/margin/margin2.asp
http://www.sec.gov/investor/tools.shtml


Other than that, duh, 1929. Back in 1929, there were less limits on margin than there are now. As stocks went down, down, down during the 1930s, more and more investors got margin calls and had to sell the stocks, pushing the market lower.

$271 in 2001, $374 today, and going up every day. That's really all the warning anybody ought to need. I think we are so screwed.