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Friday, 10 October 2008

Life on the Margins

The market crash of the past week erased most of the wriggle room I had left in my margin loan accounts. My most leveraged account (with Leveraged Equities coincidentally) needed a cash injection of $5,000 to keep it out of the 5% "buffer". As of last night my three margin loan accounts were all getting close to 100% margin utilisation:

St George Margin Loan ..................84.27%
Commonwealth Securities Margin Loan ....88.75%
Leveraged Equities Margin Loan .........92.86% (even after the cash injection!)

With the Aussie stock market down another 7% or so today, I transferred another $5,000 cash from my Credit Union savings account to the Leveraged Equities Loan account. That's just about tapped out my at call cash reserves, so I'll need some additional cash if the market continues to fall. I transferred the balance from my ING online savings account (around $500) to my credit union account, and I also placed an order with Comsec-Pershing to sell my 10 "B" shares of Berkshire Hathaway. Although BRK.B has dropped along with the rest of the US market, the plunge in the AUD vs USD exchange rate means I'll still get as much in AUD from selling today as I would have realised a couple of weeks ago. The trade won't settle for three business days, so I have to keep my fingers crossed that I don't get a margin call before the funds clear into my Australian bank account.

I had a look at selling off one of the less desirable stocks in my LE margin loan account (that has 0% margin value), however the stock had an offer price but no bid price! If I'm forced to liquidate some of my Australian portfolio to meet margin calls I'm likely to end up having to sell off the 'blue chip' companies as they have the best liquidity.

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