Talking stocks, trading, and investing in general

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

  1. lawyerdad

    lawyerdad Senior member

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    Dude, this is why you get so much shit in so many threads. I know your advice is well-meant, but it doesn't serve anybody to perpetuate bad "information". You make patently incorrect statements, then when you get called out you become intellectually dishonest and try to change the subject rather than admitting you were mistaken. Your previous about how utilizing margin is a "loser's game" and runs the risk of triggering a margin call, not about mortgage lenders potentially getting spooked about tiny ripples in your DTI ratio.

    And not that the analogy matters, but "going on margin" is not like opening a new credit card. If you've been approved for margin trading, it's like utilizing the open credit line on a card you already have. It's just a question of how you utilize an existing credit facility.

    So: yes, if you max out your margin credit buying dot-com stocks on the eve of the crash, you're going to get killed. If you simply use available margin credit as an advance on funds you've already transferred to your brokerage account but which haven't yet been credited, there's nothing that makes that a "loser's game".
     
    Last edited: Jan 23, 2014
  2. idfnl

    idfnl Senior member

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    I disagree. The difference between investing in equities being a losers game and margin is that its your own money, margin is someone else's money and when you lose it, you lose double against your own principal. Margin calls are devastating. If you have funds to back it up, why would you pay interest to use margin to begin with? Seems illogical because have to make up with gains just to get back to 0, but the losses start right away.

    Margin strictly as a short-term bridge loan is understandable, I just made the point that banks may frown on it during a mortgage process.

    You're correct, any form of borrowing to trade is a pretty stupid endeavor, bound to end badly. And no, it doesn't mean borrowing against equity is a bad idea in general, but to play the stock market? Ill advised.

    I don't really know what point you're trying to make. Borrowing to gamble is a bad idea. I'm not sure you're disagreeing, or otherwise trying to dissect a simple point into finding something wrong with it like talking about home equity loans. I'm narrowly focused on my own experiences and my advice. I'm not exactly hearing you say it's bad advice.
     
  3. lawyerdad

    lawyerdad Senior member

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    No, I don't disagree with that.
     
  4. idfnl

    idfnl Senior member

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    I said 2 separate and distinct things:

    1. Fucking with your finances during a mortgage is not the best move. It messes with your ratios, and could cause you to explain a bunch of stuff. And yes, the remote possibility of a margin call, which is small, but my point was more about scrutiny.

    2. Margin in general is a loses game. Not using margin for 3 days as a bridge, but in general as explained above in a separate sub-topic related to SG's comment.

    Please point out any patently incorrect statements I've made. These look like opinions to me.
     
  5. otc

    otc Senior member

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    I would agree with the point about not suddenly using margin for the first time while trying to buy a home.

    Lenders get weirded out by all sorts of little things... Just wait for the funds to clear. It's not like you are buying something you think will pop twenty percent tomorrow.
     
  6. amerikajinda

    amerikajinda Senior member

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    Saw this on my Twitter feed and lol'd:

    "Newbies: the direction stocks are moving is called 'down'"
     
  7. SkinnyGoomba

    SkinnyGoomba Senior member

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    Idfnl, I agree with your sentiment in regard to margin, I do not use it and I'm very strict in my avoiding it. I've seen a couple good investors who dabbled in margin in good stock environments get turned completely upside down once the market changed. Both had very rational approaches and both greatly miscalculated how much a market can change and how quickly. I've avoided it and doing so has helped me survive many downturns in the market.

    That being said, in a practical sense I avoid it because my goal is to collect interest by way of dividends, which is pointless if I'm paying interest.
     
  8. idfnl

    idfnl Senior member

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    :fu: day 2 of this shit.
     
  9. GreenFrog

    GreenFrog Senior member

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    fucking red everywhere.

    i actually managed to end the day slightly green yesterday, thanks to apple, but i dont think that will happen today.

    fucking BAC -- might have to average down.
     
  10. jbarwick

    jbarwick Senior member

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    Good thing I didn't buy yesterday.....unless I bought some VIX expecting this...
     
  11. idfnl

    idfnl Senior member

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    Looks like we have some global currency problems. China seems to be lying again, what's new? The Turkish and Argentine currencies are bottoming out.

    A bit nervous. The Thai currency was a major factor in the Asian meltdown way back.

    If this starts to get steam we may see a significant selloff, more than a typical correction. Stay away from margin right now :embar:
     
  12. SkinnyGoomba

    SkinnyGoomba Senior member

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    Could happen, corp earnings are not that impressive, esp compared to last year and honestly it seems like the solution to every crisis is the cause of the next.

    In this case it's the emerging markets.
     
  13. idfnl

    idfnl Senior member

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    Interesting point.

    I don't understand currency well enough, but are you saying that because of QE and the watering down of the dollar, that its having a knock on effect globally?
     
  14. SkinnyGoomba

    SkinnyGoomba Senior member

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    It's the turnabout where the dollar starts to become stronger thats going to become an issue. We're seeing it happen now because they're cutting back on the stimulus which is increasing the value of a dollar. Many people in emerging markets dont trust their own currency so they take on debt in american dollars. However a significant weakening of their home currencies can cause them to default on their loans.

    This is also a situation, like always, where people are placing bets and once they begin loosing on the bets, they continue to remove money from those areas, exacerbating the issue.

    Aside from all that, I see stocks priced in dollars so a stronger dollar is going to have the effect of a lower stock price.
     
    Last edited: Jan 24, 2014
  15. idfnl

    idfnl Senior member

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    I guess the idea that the dollar is stronger now is psychology. The Fed is continuing to do QE, just less. Technically the dollar is still weakening but at a decreasing rate.

    I suppose the net-net is the same since currency traders are trading this fact. Its taken a few weeks but it looks like we are seeing the impact.

    You couldn't be more right. Solving one crisis starts to devolve another. Reminds me of that Bugs Bunny when he chases a mole around and whichever hole he covers it just pops out another.
     

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