- The interest rate is changed by the lender (in this case the broker), and fluctuates with the current cost of money;
- The amount one can borrow fluctuates minute by minute as stock prices rise and fall;
- The broker can take an investor out of his equity position at its discretion, and sell his stock at the worst possible time if he goes outside of the agreed-upon margin requirements;
- The Securities and Exchange Commission sets the maximum margin requirements and can change them at will. Brokers and their customers must comply immediately;
- Investors can pay off the loan by selling their stock. Their broker will deduct whatever amount was owed at the time of sale.
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Doug Casey is a world-renowned investor and author, whose book Crisis Investing was #1 on the New York Times bestseller list for 29 consecutive weeks, a record at the time.
He has been a featured guest on hundreds of radio and TV shows, including David Letterman, Merv Griffin, Charlie Rose, Phil Donahue, Regis Philbin, NBC News, and CNN; and has been the topic of numerous features in periodicals such as Time, Forbes, People and the Washington Post.
His firm, Casey Research, LLC., publishes a variety of newsletters and web sites with a combined weekly audience in excess of 200,000, largely high net worth investors with an interest in resource development and international real estate.
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