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Yes, there is an industry itself in providing capital for the margin accounts that is almost
separate from brokers. I know there are companies that prvide the capitalfrom some
brokerage's margin account clients. But usually, when this things get around a lot and
out of hand, its a sign of market top, seen that cycle more than once already. So when
your broker is aggressively offering you margin (they get to earn good interest income and have collateral anyway), Better watch
out!! The game is nearly over!!! Since in big
picture, the players are playing with money they don't have, so its just air pushing and
fooling around with the market.
Anyway, that's us here in the Philippines, since we don't yet have a mutual fund industry
to hold up the bubble.
SHAWN wrote:
> > Date: Thu, 22 Oct 1998 00:53:40 -0400
> > From: "Gaius Marius" <magnus@xxxxxxxxxxx>
>
> > :Massachusetts regulators further allege that the company allowed
> > Mr. :Baruchowitz to allocate trades to either his account or the
> > other customer's at the end of each day. His personal account was
> > the only profitable one, according to the complaint.
> >
> > :Mr. Baruchowitz declined to comment. Christopher M. Block, Block Trading's
> > :chief executive, said the firm didn't violate any laws. He said the firm's
> > :computer system doesn't allow post-hoc allocations to separate accounts...
> >
> >
> > Wanna bet? Hell, I've done this myself. ;-) You have 15 mintues to do this
> > (from 4:00pm until 4:15 pm EST) before the "books" are closed. Note: I've
> > never worked at Block but at 2 SOES places where this is a common practice.
> > Let's say we have 2 guys trading one stock. One guy is short the stock at 87
> > and the other guy is long at 86 with the stock closing at 85. So the short
> > will take the trade off the guy at 86, covering his short, keeping his
> > profit in the expectation that the long will return the favor sometime in
> > the future. Usually this shit happens at least once a week. And the prices
> > are usually closer with the profit of around a 1/8 to 1/2 a point. At NYSE
> > member firms, this is not allowed at all but at smaller NASD firms this can
> > happen.
> >
> I know for a fact that two of the things Block did happened at my
> SOES firm. Trades were allocated across accounts for a number of
> reasons, such as not exceeding margin, covering losers as noted
> above, and any other number of reasons. The second thing was that the
> employees (at least two who were in management) pointed out how
> freely available loans were from an "angel". They highly encouraged
> lots of tickets and overtrading by saying, "margin and money should
> never be the deciding factor in putting on 1000-share (or more)
> trades. We will cover you for X dollars per thousand."
>
> At the time I was trading 500-share lots because otherwise I would
> get into margin situations almost every day. Even with a pretty
> good-sized account, you load up DELL (pre-split), YHOO, MSFT, and
> INTC at the same time, and you have a big open position even with
> only 500 shares of each. One guy in particular, put the full-court
> press on me to jump up to 1000-share lots, and don't worry about
> margin. And I had only been SOES trading for a couple of months. By
> the time I realized what my margin loans were really costing me, it
> was a bunch, and I quit SOES trading.
>
> At the time, I didn't consider either of these tactics to be shady,
> let alone illegal, because they were so openly done and widely
> accepted. Now, well I'm just not so sure. I'm just gald I was a
> trader and not an employee, because this could blow up in their
> faces.
>
> *-*-*-*-*-*-*-*-*-*-*-*-*-*-*-*-*-*-*-*-*-*-*-*-*-*-*
> "It's hard to make predictions, especially about the future."-Yogi Berra, Visionary, 19??
>
> "I think there is a world market for maybe five computers."-Thomas Watson, IBM Chairman, 1943
>
> "640 K ought to be enough for anybody."-Bill Gates, Microsoft Chairman, 1981
>
> "With over 50 foreign cars already on sale here, the Japanese auto industry isn't likely to carve out a big slice of the U.S. m
> arket for itself"- Business Week, 1958
>
> "TV won't be able to hold on to any market it captures after the first six months. People will soon get tired of staring at a p
> lywood box every night."- 20th Century Fox's Daryl F. Zanuck, 1946
>
> "Don't sweat petty things. Don't pet sweatty things."-Anonymous
>
> "When you are courting a nice girl an hour seems like a second. When you
> sit on a red-hot cinder a second seems like an hour. That's relativity." -
> Albert Einstein
>
> Shawn Devlin
> mailto:shawnd@xxxxxxxxxxxxx
> http://www.netcom.com/~shawnd/shawn.html
> http://www.netcom.com/~shawnd/joke.html
> http://www.netcom.com/~shawnd/spar.html
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