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Talking stocks, trading, and investing in general

Discussion in 'Business, Careers & Education' started by mikeman, Feb 2, 2011.

  1. idfnl

    idfnl Stylish Dinosaur

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    Stay away from margin. In the middle of a home purchase do you really want to take the risk of a margin call?




    I've been taking small nibbles.

    This is ugly today. The market is pricey, but today's news doesn't seem enough to trigger a sustained correction.
     


  2. lawyerdad

    lawyerdad Stylish Dinosaur

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    I took the suggestion to be that he use margin strictly as a short-term bridge loan to allow him to make an immediate transaction with cash he has available but which will take a few days to actually arrive and be deemed "available" in his brokerage account. If he's initiated the transfer of the underlying funds, there's no real risk of a margin call unless he's shorting or selling calls or something where his exposure theoretically exceeds the purchase price.
     


  3. amerikajinda

    amerikajinda Stylish Dinosaur

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    I'm taking a gamble on Emerging Markets and large-cap Foreign stocks...

    SoftBank, MGM China, Baidu, Ryanair, Taiwan Semiconductor, Murata, etc.
     
    Last edited: Jan 23, 2014


  4. jbarwick

    jbarwick Distinguished Member

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    Just not bothering with it.
     


  5. stevent

    stevent Distinguished Member

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    Yes this is what I meant

    The fear of margin in this thread is way too high
     


  6. SkinnyGoomba

    SkinnyGoomba Stylish Dinosaur

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    Might be good for a couple days of red.
     


  7. idfnl

    idfnl Stylish Dinosaur

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    My life experience says you don't introduce any debt or make any changes to finances in the middle of a refi or home purchase.
     


  8. SkinnyGoomba

    SkinnyGoomba Stylish Dinosaur

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    I understand margin, rather than fear it, but don't feel the need to use it.
     


  9. idfnl

    idfnl Stylish Dinosaur

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    I fear margin because I lost many, many thousands on Oct 27, 1997. I worked at a shoe store making less than $4 an hour, saved my money, opened a brokerage account at Shearson Lehman. Deposited to it. All the investments and gains I'd made trading since age 16 in 1988 were lost. Even back then I understood compound returns, I know that money, had I protected it like I recommend here, would be very significant today. Margin is a losers game.
     
    Last edited: Jan 23, 2014


  10. lawyerdad

    lawyerdad Stylish Dinosaur

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    That's a meaningless statement. My life experience say you shouldn't generalize your own mistakes into universal rules purportedly applicable to everyone, particularly when you're talking about different circumstances and different types of choices. I obviously don't know what life experience you're talking about, but I'm pretty sure you didn't suffer financial disaster because you used available margin as a three-day bridge loan while you were moving otherwise uncommitted funds from one account to another.
    If by not making "changes to finances" you're saying that one shouldn't invest in the equities markets liquid funds separate from those set aside for the mortgage transaction, I'm inclined to disagree -- but that's not the point under discussion anyway.

    What we're talking is the narrow question of whether there's significant risk involved in using margin as a short term vehicle as described above. Functionally, it's the same thing as making a retail purchase with a credit card (knowing you have the necessary funds sitting in your checking account) because you didn't bring cash or a checkbook to the store with you, and then immediately transferring the purchase amount from your checking account to your credit card count. It's a very safe, responsible use of short-term credit.

    Again, whether or not investing in the stock market today would have been a wise move for jbarwick or anyone else is a perfectly debatable question. And it's perfectly prudent for those of you who don't fully understand how margin loans work not to sign up for something you don't fully understand. But from an informed risk/benefit perspective, it would be completely senseless to pass up an otherwise attractive investment opportunity, for which one has available uncommitted funds, in an irrational attempt to avoid perceived risks that are not even relevant to the transaction being considered.
     


  11. lawyerdad

    lawyerdad Stylish Dinosaur

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    If that's the basis for your statements, it would be equally logical to say that "investing in the equities markets is a loser's game". Presumably you lost thousands because you gambled by leveraging your risks in the hopes of making greater gains. When you gamble with borrowed money and don't have other liquid assets available to repay the loans, that's a risk you take. It has nothing to do with the use of margin generally. It has to do with how you used margin. If you take a home equity loan or a cash-out refinance to go to Vegas or speculate in the markets, you risk disaster as well. But that doesn't mean that borrowing against one's home equity can never be a responsible choice.
     


  12. GreenFrog

    GreenFrog Stylish Dinosaur

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    Lawyerbrah to the rescue with reason and rationality!

    But in all seriousness guys, I've lost money on apple stock. It's a terrible investment. Don't touch. Sell shares now!
     
    Last edited: Jan 23, 2014


  13. Cantabrigian

    Cantabrigian Distinguished Member

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    You're investing in the management company, not an individual fund. The revenue stream that the mgmt co gets from management and performance fees from a lot of different funds in different stages of their lifecycles is totally different from the returns in an individual fund.
     


  14. idfnl

    idfnl Stylish Dinosaur

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    Your comment about a credit card is not correct. By going on margin, you're opening a new card, to use your analogy.

    In reality, both hold true. You shouldn't make big card purchases either because you have to explain it if asked, and it messes with your DTI ratio.

    I'm making a general statement as advice to others, nobody need listen. I've been thru a few home purchases and a bunch of refinances. They make you present everything, and make you explain anything you do. For example, I was awarded a credit line increase by a card company (unsolicited), and I was required to submit documentation to show it was automated and that I didn't request it. Another example is how I transferred money once between 2 separate 401k accounts, I had to submit all kinds of bullshit to prove the funds originated from another 401k and that money was in the account x months before the transfer.

    I'm not questioning whether its a prudent investment choice. I'm only commenting on how mortgage lenders put you thru the ringer when your parameters change so be aware.
     
    Last edited: Jan 23, 2014


  15. djh

    djh Distinguished Member

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    While I think margin can be helpful at certain times, idfnl is totally right about mortgage lenders. They're a pain in the ass and I wouldn't move money around or take on any new debt while in the process of buying a place.
     


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