Evan Grey Owl

Investors: Don't Borrow Money to Buy Stocks

Thank you for you honesty in advising against use of margin. Some firms use complicated risk measures in which stocks can fall into one of four or more categories of marginability. The initial allowed equity to margin ratio is one thing, but the ratio rapidly changes, especially in a volatile market, and it can be VERY difficult to keep on top of what is happening when 5-6 stocks that are each rated differently, are all changing rapidly. It has been my impression that downward price manipulations may even have been engineered for the purpose of producing margin calls, to give greater liquidity to the banks and brokerages. The shares remain in street name, so when artificially depressed prices rebound days later, the benefit is all to the house.
What have we been hearing about day after day except the desperation of the banks and brokerages to have more cash - improve their balance sheets. Trouble is, some of us hadn't volunteered to donate.
One cannot be too careful in this market, or until regulation of the markets is reviewed and reformed significantly. Technicals have been rendered moot recently. It is too distressing. Not right.