Posted on 05/14/2006 9:37:09 AM PDT by ex-Texan
In that case, could you explain your apparently sarcastic response to me:
In 1929, every Tom, Dick and Harry was buying hyper-priced stocks on margin and with ......interest only loans.........Polybius
Yeah, margin loans are interest only. Duh.........Toddsterpatriot
As I understand it, in the 1920's, besides using margin accounts, people were also borrowing money with interest-only loans secured by their own real property, not securities, in order to get even more cash to feed their stock market speculation.
How is that the same as having a margin account with their broker to the point that it deserves a "Duh"?
It's not the same. You should have said, "In 1929, every Tom, Dick and Harry was buying hyper-priced stocks on margin and paid for them with interest only loans on their houses".
You ever buy a stock on margin and get a payment book? Monthly payment coupons to mail in? Amortized over how many years? Fixed rate?
Thank you.
You should have said, "In 1929, every Tom, Dick and Harry was buying hyper-priced stocks on margin and paid for them with interest only loans on their houses".
Or it could have been interest only loans secured by land or by a warehouse full of inventory or by a yacht or by a going business concern, etc, etc.
The bottom line is that the two instruments are not the same and that they were used in combination to wildly increase the cash chasing those hyper-priced stocks:............ Mortgage the family business with an interest only loan thereby borrowing more money than you can actually pay principal and interest on and then use that money to buy stocks on margin buying more stock than you can afford even when leveraged to the max.
The result was Monopoly money sending stock prices through the roof and everybody had a great time until it was time to actually pay up. Then disaster struck.
The same thing is happening in some real estate markets today with people buying houses at prices they cannot afford with money borrowed on terms they cannot afford to pay off............unless some Greater Fool comes along as a buyer.
How could you leave out taxes, brush fires, humidity, traffic, Democrats (southeast Florida), and rudeness? I'm probably forgetting a few myself.
They don't want to. It sucks. Stay away.
The big boys are moving to other markets, other investments, the little man will get burned. I've seen estimates that 25-30% of the FL housing market is owned by speculators.
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