For those of you who were in the US market back then in the late 1990s, you must quickly remember one famous tragic story of margin-ers, and this is a big big one. At that time, in 1998, it looked like the world was falling apart, just the same as now. Worse even than Greece, Russia defaulted on its government bonds. The turmoil caused a flight to quality. Investors rushed to the safety of U.S. Treasuries, pushing up prices.
And, there was this behemoth hedge fund which was spelled into trouble because they bet on lower bond prices. Worse yet, Long Term Capital Management used monster amounts of margin in its bets. Even with Wall St. veteran John Meriwether and options gurus Myron Scholes and Robert Merton on board, heavy leverage and a wrong bet led to disastrous results. Long Term Capital Management lost billions. It had to be bailed out in a move orchestrated by the Federal Reserve of New York in late September 1998. So, it is not only you. They were all the same at their own time. We know this may not make you feel better, but at least in your bitterness there is still a taste. Turn now to contemporary context, what if Greece will declare default in a week or two from now? If there was only Russia in 1998, we have now Spain, Italy, Portugal, Ireland, Belgium all have at least got their own stake in being downgraded, the very least visible sign. We know, most of you, last Friday's margin-ers must have had the same question. Well, do not worry, Whitney had long asked the same question back in 1987: http://www.youtube.com/watch?v=HVws1rwqY9U She asked, Where do broken hearts go? Can they find their way home? Back to the open arms Of a love that's waiting there And if somebody loves you Won't they always love you I look in your eyes And I know that you still care, for me '+' On Wed, May 25, 2011 at 9:08 AM, positif01 <[email protected]> wrote: > They are desperate for hope after Monday sell-off. How so? Because they > trade on luck and baseless confidence on Friday thinking market will bring > them to heaven, instead on Monday heaven bring their hope back to market. > These a lot and so lots of margin-ers or those, who are borrowing money from > their brokers to buy a stock and using their investment as collateral or > those who are simply loaned money from their brokers to buy a stock, will > soon come to face the bitter fact of their faith. We expect long lines of > "margin calls" from their miss congeniality, due to the massive retracing > price this week, this Wed, tomorrow, and even worse during the cashing-in > day, Friday. We may look something like what happened in Thailand bourse on > last Friday and Monday. > > So, what is the good out of the bad? As our grandma reminds us that "every > cloud has a silver lining", then if you are a die-hard buyers who do not > care what on what in the market, you may want wait to eat alive these > margin-ers in their desperado. Let these margin-ers be soaked in pain and > throw you towel and basket of stock. > > Are these "margin-er eaters" vultures are monsters? No, they are not. They > are instead these margin-ers's angels who happen to be kind to help them > find sellers to buy their deflated stock. That is what you call market. > There is no good or bad. There is only bid to buy and offer to sell. > > Enjoy this thrilled dynamics for profit, either side, go long or go short. > > '+' >
