Based on the only example I have of their graduates, I recommend that course of action.

Martin, you seem to enjoy rolling around in your ignorance and then defending it in public places. Why do you embarrass yourself so?

You enjoy writing these vague, unsubstantiated, personal assertions.

No broker will extend margin to someone until it finishes an exhaustive process of due diligence.

Your brokers are so exhaustive. They should be our central planners.

No broker is going to extend credit to a moron with only ten bucks and a negative expectancy strategy.

Gee. I wonder why investors are so reluctant to buy these mortgage backed securities now. We all know that the mortgage brokers do their due diligence. Maybe too little diligence is due … or maybe risk is poorly understood by people presuming to judge others understanding of it.

Now, stop bothering the grown-ups and go look up "expectancy" and learn how to calculate it.

Hmmm. I have a master's degree in applied mathematics with a 4.0 GPA from the University of Alabama in Huntsville, so I have all of these university professors testifying to my understanding of "expectancy", and I have you here disputing it. Maybe I should sue the university for fraud.

No broker will extend margin to someone until it finishes an exhaustive process of due diligence. I don't appreciate your hypothetical because it is utterly pointless in every way except as a clear illustration of your intense ignorance. No broker is going to extend credit to a moron with only ten bucks and a negative expectancy strategy. Even after months of due dili, the broker monitors your daily volatility and if it gets uncomfortable with the volatility, it will call all or a portion of its loan to you and you will spend all of the cash in your account paying back your broker because the broker will simply take it out of your account. You're confusing private loans with brokerage arrangements. We're not talking about the loan your grandma got for home improvements or the Fed and the banking system. We're talking about traders and margin accounts. Do yourself a favour and stop twisting yourself into a pretzel in a fruitless attempt to win an argument you don't even understand.

Now, stop bothering the grown-ups and go look up "expectancy" and learn how to calculate it. I don't have time to disabuse you of your BS this morning.

The two are inexorably linked. Basic finance.

Speed and distance are also linked. So what? What I said is that they aren't comparable. One compares a distance to a product of speed and time. One compares expectations of reward, which are products of risk and reward, not risks and rewards.

No, you don't state it as a matter of fact.

As a matter of fact, I do.

The clear implication of everything you say is that there is no cost of borrowing or that cost is lower than it should be.

No. I never say or imply such a thing. You somehow confuse your own words with mine here, presumably because you want to dispute some words and can't find enough of mine to dispute.

"Suppose you'll lend me a thousand dollars to buy a thousand lottery tickets if I'll buy ten lottery tickets with my last ten bucks."

That would never happen

You obviously don't appreciate the hypothetical.

"I can't repay you anyway, and no one will jail me for indebtedness."

If that happens, I'll put a lien against your personal property and against any future earnings you have.

You apparently missed the part about the ten dollars being my "last". Good luck getting my next before I buy food with it.

You'll never get another loan until you pay off those liens and your wages are subject to garnishment.

You've apparently never declared bankruptcy. In fact, people get loans the next day. Don't you listen to car salesmen on the radio? "Bankruptcy? Noooo problem!"

There's no reason you wouldn't take that risk! Except that nobody will lend you the money to take it …

But the Fed did accept all of those mortgage backed securities, that private investors are so reluctant to buy, as collateral when financing the purchase of Bear Stearns. I'm not making that up. It's not a hypothesis. It's a fact. These things you say never happen do happen.

The two are inexorably linked. Basic finance. The expected return is a function of payoffs and the probabilities of those payoffs. The reason you think they are different is because you don't know how expected return is calculated. Don't you have an applied math degree? This should be child's play for you. Grab a finance book and have a read before you embarrass yourself, Martin.

I haven't decided anything. I state as a matter of fact that other people's money is at risk.

No, you don't state it as a matter of fact. The clear implication of everything you say is that there is no cost of borrowing or that cost is lower than it should be. If you don't understand that this is your implication, it's only because you don't understand what you're really writing. In fact, credit is not extended in the willy-nilly way you think it is and the consequences are not as small as you imply. Although, to be fair to you, I'm not that surprised you think that since the only criteria to obtain a mortgage a couple of years ago was a pulse and there was a loosening (although not that much) of credit standards even with professional traders. Margin requirements have been tightened for institutional accounts across the board – but they were never as loose as you imply in your example.

You write these words without specifying a single error in the post.

The sole reason is that adequately correcting your errors is far more involved than I have time for right now. I'll give you a start, though.

"Suppose you'll lend me a thousand dollars to buy a thousand lottery tickets if I'll buy ten lottery tickets with my last ten bucks."

That would never happen (although, if you find a willing idiot, please take advantage). The implied payout of the lottery in this example is far higher than it actually is. The only way you're going to get the $1k loan from Methinks Brokerage is at a prohibitive interest rate and guaranteed by your personal property because I've already calculated that the probability of getting my money back is uber slim. But more likely, I won't even give you a loan, but you'll give me a laugh by asking for it.

but you'll readily forgive the debt,

not any brokerage house I've ever met.

I can't repay you anyway, and no one will jail me for indebtedness.

If that happens, I'll put a lien against your personal property and against any future earnings you have. You'll never get another loan until you pay off those liens and your wages are subject to garnishment. No other brokerage will extend you credit. It won't be fun. There are endless scenarios – legal and practical – that can happen here but I don't have time to get into them. Suffice to say, you'll pay a heavy price – keeping in mind that our original example is not an idiot with a lottery scheme but a professional trader (read: a professional idiot with an oil scheme whose career is now over.

If I do win the lottery, I get a million dollars and pay you a thousand. Why wouldn't I take this "risk"?

There's no reason you wouldn't take that risk! Except that nobody will lend you the money to take it – with the possible exception of your cousin Lenny whose IQ doesn't quite reach into the high double digits.

In other words, all of your assumptions are based on complete ignorance of how to calculate expected returns and how credit is extended. Thus, none of your objections or conclusions make any sense. You should refrain from being so sure of yourself until you have reason to be. Hope that you found that more helpful.