Margin Cuts Both Ways

The surge in margin debt since late last year, along with the recent bloodletting in Nasdaq names, has financial writers hissing with contempt for foolish investors that are now (or have ever been) margined. However, margin is like a chain saw: a very useful tool -- if you don't cut off your leg.

For example, did you buy your house on margin? Or did you pay cash in full at the time of closing? (Yes, of course you did -- but I'm not writing to you, Mr. Gates.)

The conventional view today seems to be that it is prudent to have big margin on your house but imprudent to have any margin at all on your stock portfolio. What's wrong -- and what's right -- with this thinking? Can experience with one sort of borrowing inform the other? ...