From: Max More (max@maxmore.com)
Date: Thu Dec 23 1999 - 12:24:44 MST
At 08:53 AM 12/23/99 -0800, you wrote:
> (b) If the Fed thinks there is a bubble (in the stock market) and
> wants to take it down slowly, would one way to do this be to
> ratchet down the allowed stock margins? You could do something like
> a decrease of 1%/month on the allowed margin borrowing values
> and slowly decrease excessive risk taking. As things stand
> now, the market increases strongly encourage you to margin
> to the hilt. (Or are the margin requirements controlled by
> law or the SEC and the Fed can't influence them?)
Robert, though I'm no fan of government intervention, *if* I were to want
to dampen down the stock market, I would not do it by raising interest
rates (which seems to be to be based on the discredited Phillips Curve)
but, as you suggest, by raising margin requirements. Margin requirements at
50% are considerably tougher than in the 1920s (10% I believe), and
individual brokerages will not let you use margin based on a list of highly
volatile stocks.
But don't take all margin away--it can be very useful, especially as a
temporary source of funds to buy a little while before you're ready to sell
something. You can have my margin when you pry it from my cold (-196C),
dead (deanimate) fingers!
Onward!
Max
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