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Sorry Norman. After a grand total of 5 minutes of searching on the
internet, I found enough info to invalidate your opinion. Attached is a
text file containing passages from two different sites on the web discussing
the 1929 crash. The first passage makes it clear margin rates for investors
in the twenties got as low as 3%. The second passage makes clear that the
broker call rate (referred to as the "Call Market") did not go to 20% until
AFTER the crash was underway.
Now, if margin rates got as low as 3% during the twenties, and didn't reach
20% until after the crash, is it really so hard to believe that the market
spiraled upwards at an average margin rate of 10% before crashing?
Of course, the point of this whole topic to begin with was whether the
situation today is similar to 1929. In terms of the percentage of stock
outstanding that was purchased on margin, the correlation is about zero.
Bruce
----- Original Message -----
From: Norman E. Phair <ericrogers@xxxxxxxxxxxxx>
To: BruceB <bruceb@xxxxxxxxxxxxx>
Cc: <droex@xxxxxxxxxxxx>; Earl Adamy <eadamy@xxxxxxxxxx>; RealTraders
Discussion Group <realtraders@xxxxxxxxxxxx>
Sent: Thursday, October 14, 1999 11:24 PM
Subject: Re: FOMC meeting?
> BRUCE:
>
> I have made statements about the broker call rate at
> least 3 times in my e-mails.
> The broker call rate is the rate that brokers pay to
> borrow stock from a bank.
> Example: You walked into your broker in 1929 and
> purchased $100,000 worth of stock.
> The broker walks accross teh street and pledges that
> stock with the bank and receives
> a check for $80,000. The broker then charges you
> somewhere at or above the minimum
> maintenance requirement at the time. The broker call
> rate is in the annals of history.
> It is not a facticious figure that has been handed down
> through the ages like this 10%,
> that you persist in repeating after I have stated many
> times that the broker call rate in 1929
> was 20%. Lets go back to economics 101. If your bank
> wants to charge you 8% for a fixed 30 year loan
> I sincerely doubt that you will be able to get a 4%
> loan considering all other things are equal.
> If the banks post a broker loan rate of 20% that is
> probally what the minimum was, if a broker with bad
> credit walked in he would probaly pay more. These
> statistics are a matter of public record. The 10%
> figure is not that I know of. If you understand this
> we call go on to chapter 2. But first I would like you
> to refer me to published public records that show that
> anyone could borrow money at 10% in 1929. In 1927
> maybe,or even 1026. If a bank posts a broker call rate
> at 20% they are not going to lend money at 10%. If they
> did the broker call rate would be 10%. Remember
> interest rates were rising at least 2 years before the
> crash. There are reasons for this but that is chapter
> 5. I would like to put this puppy to rest before I
> answer the other questions you asked. I do not want to
> confuse the issue. i await your reply
> I will be away until Monday. We can resume this issu
> next week.
>
> Norman E.
Attachment Converted: "c:\eudora\attach\Crash.txt"
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