Tuesday, May 26, 2009

Fun with Margin

For those of you following my adventures with margin loans let me provide an update. I received a check for $5,000--no questions asked--from TD Ameritrade last Thursday and deposited it on Friday. Was this a withdrawal? Well, the test would probably call it that, but it's actually a loan backed up by the ever-volatile market values of the stocks inside the account. It's a loan against "SMA," and now I have to repay the $5,000 plus interest.

Interestingly, after I requested the check, I got good news from my publisher, First Books, who was kindly sending me a royalty check larger than I anticipated. I also sold 80 shares of NTRS and that check for $4,000 is now on its way, so I'm only partying at this point in the name of helping my customers and blog readers--I no longer even need the five grand. Either way, remember that the $4,000 was a withdrawal of funds after a sale of stock--I made sure they waited until the T + 3 settlement date so they wouldn't think I was taking another hit off that metaphorical crack pipe known as SMA. It's just my cash--please send it to me. And, they did, with no fees, no postage charges, and no questions asked. Remember that cash in a customer's account does earn the broker-dealer interest, but that cash amount is owed to the customer upon request and must be paid out promptly. Of course, with a margin loan against SMA, nobody has to cajole the broker-dealer--they can't wait to start charging me interest on that loan with the same enthusiasm that VISA apparently has for those little pretend "checks" they keep sending me, three to a page.

Remember, I "plan" to sell 90 shares of HSP after they rise at least $10 a share. If so, I'll pay back the $5,000 loan and likely never hit that pipe again. But, how often do a gambler's "plans" pan out? Not very often, so, as they say on the Mythbusters--please do not try this at home.

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