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Saturday, 11 October 2008
Sailing very close to the wind
Despite pouring $10,000 cash into my margin lending account with Leveraged Equities over the past two days, the market plunge this week saw my margin utilisation hit an all-time high of over 97% as at close of business on Friday. There is an extra 5% "buffer" allowed after hitting 100% margin utilisation before a margin call will be issued, but another substantial decline in the Australian market early next week would force me to start selling off some of my Australian stocks. The "at market" sale of Berkshire Hathaway "B" shares from my US portfolio went through on Friday at $3,000 per share. That was a pretty tragic result, as the stock was massively down at the open, but recovered to close at $3,780! With 20:20 hindsight I should have placed the order with a fixed price rather than "at market". As usual greed and fear brought me unstuck. I sold the stock because I wanted to free up some extra cash to avoid selling Australian stocks due to a margin call, and yet I was too greedy to place a limit order at a reasonable discount to Thursday's closing price. Trying to get a slightly better price by going "at market" ended up costing my about US$10,000! At the moment it seems that everything that could go wrong, is going wrong.