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Monday, September 14, 2009
Wall Street Crisis: A Look Back
FOXBusiness
Lessons Learned From Lehman
It triggered the destruction of trillions of dollars of worldwide wealth, but have we learned anything from the collapse of Lehman?
Where Are They Now?
They've been blamed for ignoring the massive warning signs that led to the financial meltdown--take a look at the faces of the crisis a year later.
The Next Bubble Looks Green
As the housing and credit markets are still licking their wounds, experts say the next bubble to burst will be renewable energy and eco-friendly products
Bailouts Worsen 'Too Big to Fail'
Thanks to Uncle Sam, some of the “too big to fail” banks are now bigger than they were before the fall.
September Looms Large for Wall Street
The fire may have been put out on Wall Street, but the smoke has yet to clear.
MBS, CDO and Romeo: The Temptation of a Bubble
The Panic of 2008 is just another in the long, long history of credit-fueled asset bubbles which pop, and destroy their imagined wealth in the crash.
FOXBusiness.com LIVE Transcript: Too Big To Fail
Check out the transcript of FOXBusiness.com LIVE's special featuring bank analyst Dick Bove, economist James Galbraith and former FDIC chairman Bill Issac.
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FOX Translator
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Think telemarketer. Except, it's much worse because you can't avoid this call. Instead, when you get one, it's time to pay up, because the bet you placed with borrowed money is eating itself.
Buying stocks on margin is risky because you're essentially "playing" with someone else's money. If the shares you purchased tank, your losses will likely be more than if you had bought the shares with your own cash. This is why the New York Stock Exchange and the Nasdaq impose certain restrictions on the practice.
Initially, you¿re only allowed to borrow half of the money from your broker when buying on margin. You set up a margin account and from then on must keep a maintenance balance of at least 25% of the market value of your stocks.
If the market value of your investment falls below this minimum, you're required to make up the difference by either depositing money into your account or selling some of the stock. If your broker notifies you that you've dipped below this minimum, it's called a margin call.
If you fail to adjust your account accordingly, the broker is authorized to sell shares in your account to make up the difference. The broker can even sell other stock in your margin account to make up for the loss that selling the shares didn't cover.
As an example, say you buy $8,000 in stocks of any given company. You borrow the maximum $4,000 from your broker and pay the rest yourself. Now, if and when the total value of these shares changes, you must make sure you maintain at least $2,000 (25%) in equity. In other words, if the total value were to drop below $6,000, you¿d be in trouble since you only put in $4,000 of your own money to begin with.