Saturday, November 10, 2007

Anecdotal Stock/Housing Market Evidence

I flipped on the radio and heard the following on Bob Brinker's Money Talk today. Hopefully I will do it justice (but it is from memory at this point).

A woman called in for some advice. They had $65,000 in the bank. They borrowed $50,000 in home equity. They took the total amount, all $115,000, and invested it in 30-40 stocks priced under $5 earlier this year. They now have just $80,000 total.

She was asked why they'd done that? Apparently her husband "had a feeling" that it was a good thing to do.

This is actually two stories and both are linked (betting vs. investing, borrowing vs. saving). One wonders how many others have done it. This type of activity would not show up as stock market margin debt. Hey, I'm just wondering, that's all.

You've got $65,000 in the bank, but apparently that's not enough to speculate on penny stocks. This is an overleveraged society. You've got to find a way to increase the payout when your sure thing bet pays off.

See Also:
Savvy Chinese Know Exactly When Bubble Will Burst!
The "Sure" Thing

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