John Ebert: “Your comment regarding moving shares from margin accounts to cash accounts [to squeeze the shorts] got me wondering. Is there any more risk with a margin account than a cash account? I never buy stocks on margin, always pay in full. Should I change the status of the account to cash rather than margin?”
No. The only risk is that, given the extra options a margin account allows you — like borrowing and shorting — you will do something rash. But in terms of the safety of the account itself, you needn’t worry.
Then again, if your broker isn’t giving you a good deal, perhaps you should instruct him to transfer all your holdings from “type 2” (margin) to “type 1” (cash). It won’t make any difference to you, since you never use margin; but it will keep the broker from earning (tiny) fees lending your stock. If he’s not being nice to you, why should you be nice to him?
What, we have been speculating, is a spackle emergency?
Michael Choquette: “It’s the last weekend of the school year and your dorm room is about to be inspected. You are in a hurry to return home and look for job because you are low on cash and don’t know where your next glass of beer is coming from. If the room passes inspection, your damage deposit is returned to you — cash that you wrote off and forgot nine months ago, but God! what a windfall today! Any wear and tear beyond the normal in your room and the school will keep some or all of your deposit. What to do? There’s holes *everywhere*. Wait, I know! Toothpaste! But mine is the wrong color, mint, pastel green. If someone down the hall uses some off-white stuff, the deposit is good as mine. Heck, I’ve known guys who mixed toothpastes just to get the right color.”
Michael concludes: ” If you rent, keep toothpaste. If you own, buy spackle and do it right.”
Quote of the Day
Markets are very good at what they do, in part because they harness greed and envy (in fact, all of the Seven Deadly Sins except sloth) and turn them into positive virtues.~Rocky Mountain Institute newsletter
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