How bad is this really for the market? How far do stocks usually fall when these margin calls kick in and does a margin call mean an instant sell by the broker/lender?

MrsPeal

-- MrsPeal (...@...com), January 28, 2000

Answers

Margin debt a problem?? I thought that only affected a falling market.

What gives??

-- Z (Z@Z.Z), January 28, 2000.

Margin calls on the stock market will be a huge problem when the markets head south, and they don't have to fall very much at all. In fact brokers can call his margin any time they want. But the gambling debts of stock market players pale in comparison to the enormously leveraged bets of the hedge funds. As was demonstrated back in 1998 when LTCM blew a bet they had on the Russian markets. Hedge funds can leverage a few million dollars into billions through the use of derivatives. The problem is when the bet goes sour the gambler has to cough up billions that no longer exist. The 300 trillion dollar side bets in the derivative markets make the $15,000,000,000,000 dollar U.S stock market seem like small change by comparison.

-- O Yeah? (worldpage@aol.com), January 28, 2000.

And who paid for the LTCM blow-up (Bail-Out) And why were they bailed out?

-- Larry (Rampon@Dallas.net), January 28, 2000.