[RT] $45 Million in Bad Margin Calls

["JW" <jw@xxxxxxxxxxxx>]

FYI...

JW
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$45 Million in Bad Margin Calls
Track Data President in Massive Debt After Risky Investments


By Dunstan Prial
The Associated Press

N E W   Y O R K, April 19 — The founder of an online stock trading firm at the forefront
of the risky world of active day trading is $45 million in debt as a result of his own
risky investment strategy — buying stock on margin.
     Barry Hertz, the founder of Track Data, a Brooklyn, N.Y., firm that caters to
investors who disdain professional advice in favor of instant access to the markets, owes
the money to four brokerage firms from whom Hertz borrowed money to speculate in the stock
markets.
     The company said in a statement earlier this week that Hertz was forced to put up
half of the 45 million shares he owns of Track Data as collateral against his debts.
Self-promoting Firm in Spotlight
Track Data is well-known in the investment community, both for its flood of advertising on
financial news network CNBC as well as its endless streams of self-promoting press
releases.
     Rafi Regeur, Track Data’s director of marketing, said today that Hertz’s debts have
no direct impact on the company. “The margin debt is in Barry Hertz’s personal account. It
is not an obligation of Track Data,” Regeur said.
     He said Hertz would not be available to comment.
     The irony that the founder of a firm that promotes risky investment strategies would
himself suffer losses after employing risky methods was not lost on market analysts, many
of whom have been outspoken on the risks of buying stock on margin.
     “If it can happen to him, it can happen to anyone,” said Sam Burns, a research
analyst at Ned Davis Research, a Venice, Fla., market data firm.

Experience No Match for Sell-Off

Burns noted that Hertz, 50, would probably be considered by most to be a savvy
professional investor. Yet his years of experience didn’t shield him from the historic
market sell-off last week.
     Thousands of investors who borrowed money to buy volatile technology stocks on margin
also incurred severe losses last week.
     Investors borrow money to buy stock in the hope that the stock will increase in
value. The stock purchased on margin is used as collateral against the value of the loan.
     If the stock goes up, the investor can use the profits to pay back the borrowed money
plus interest charged by the lender.
     But if the stock price falls, thus lowering the value of the lender’s collateral, the
lender can make what’s known as a margin call, which requires the borrower to put up more
cash to ensure that the loan is repaid in full.
     Hertz’s $45 million in debts resulted from margin calls from the brokers from whom he
borrowed. The company did not identify the four brokers.