tag:blogger.com,1999:blog-3011727801882113130.post7774345237244604159..comments2023-07-02T09:28:04.887-04:00Comments on Alex Dalmady's Blog: The J-WordUnknownnoreply@blogger.comBlogger2125tag:blogger.com,1999:blog-3011727801882113130.post-17605202690807370852009-03-30T22:36:00.000-04:002009-03-30T22:36:00.000-04:00If liquidity is the issue, then let that be the cr...If liquidity is the issue, then let that be the criterion (for allowing a security to be marginable). But if "riskiness" is going to be the criterion, let's at least try to use is half-consistently.<BR/><BR/>I was just using margin as an example of irrational bias towards junk. The leverage of bonds in general varies. You can get up to 85%-90% lending value on a quality bond and maybe 50% on a BBB. Junk usually nada.<BR/><BR/>I don't think the idea is to protect the bank or client from risk, but that risk is assessed in a much more equitable and rational way. I think we can all agree that the markets need better risk-management and distribution, but not necessarilly less risk (at least IMO).<BR/><BR/>Nice to see you didn't use the J-word. LOL.Alex Dalmadyhttps://www.blogger.com/profile/04502544813279011007noreply@blogger.comtag:blogger.com,1999:blog-3011727801882113130.post-34492713139940230922009-03-30T14:11:00.000-04:002009-03-30T14:11:00.000-04:00You raise some interesting points in your post, bu...You raise some interesting points in your post, but I'm not sure that I agree that high yield bonds should be allowed to use for margin. It does seem funny that the underlying stock can be used, but there is more liquidity in stocks and just because a stock probably shouldn't be used for margin, doesn't necessarily mean that their bonds should be. Seems like the better solution would be to only allow margin on stocks that have better than a BBB+ rating on their debt, but that wouldn't necessarily protect the banks or client from declines. Even good strong companies can go down in value. It'd probably be an even better idea to have a system not tied to the almighty rating agencies, but I won't hold my breath waiting for that to happen.Davis Freeberghttps://www.blogger.com/profile/16697874317490303586noreply@blogger.com