Reply to Thread

Message:: [QUOTE="mikem2000, post: 1646546, member: 30574"]When you buy on margin, it is in fact taking out a loan. Maybe without the paperwork, but you need to pay it back and you pay interest on it. The underlying asset is used as collateral.  If the value of that asset falls too much, you may need to sell off of the asset or come up with more money.  That is a margin call. If you don't come up with the cash or do net sell some or all of the asset off, your broker will do it for you, without your permission, since, just like a house, he has that right  since you do not own the asset.  At least not all of it. Now futures are a bit different, they are  using leverage also, but it is not margin, they are more like options, but in no case do you pay 10% and get 100% ownership.  You have only purchased an agreement. Now there are a lot of folks who do agree with you and the think the  huge amounts of leverage available lead to the housing bubble since many folks were buying more house then they can afford.  I disagree, I firmly believe it was the easy credit available to folks without a decent credit rating.  But hey it was a secured loan, what could go wrong? Now, if your view is correct and it was the leverage, there is no doubt this lead to increased valuations.  So I have to ask, why would leverage skew the housing market upwards and in your opinion, since you believe silver is undervalued,  skew that market downwards[/QUOTE]