IB ad on inside of Futures and buying power?

[tango29]

On the inside front cover of Futures magazine Interactive Brokers show depositing $100,000 and having a total of $500,000 buying power. I haven't been equity trading in awhile, but I thought $100,000 would give you $400,000 buying power, or 4x your balance. Which is correct?
I also find their ad interesting from the point of promoting using full buying power and taking out a $400,000 loan. They show taking the money and putting it in dividend earning stocks paying 5% dividends, and that compared with your interest charge gives you a 20% return.
All I can say is, mortgage brokers! Didn't we just have this scam in real estate? Of course equities always go up so you never run the risk of a margin call, and I guess you pay no commissions either, or at least not mentioned.
Anyway, I found the ad pretty interesting on a couple of levels in light of where our economy is now with people levered up who shouldn't have been in the first place. I can see someone using a 0% credit card deal to jump on this one.

 

[just21]

You can apply for portfolio margin if you have more than $100k which is more generous than reg t margin.

 

[just21]

What stocks pay 5% dividends apart from vz? When I googled us dividend stocks they all seemed to pay 3%

 

[just21]

3%-1.6% cost of borrowing the money is not very attractive.

 

[tango29]

I wondered about the possibility of finding stocks paying 5% that were fairly good companies. They show the interest rate at 1.25%, maybe that was at it's lowest point. Thanks for the portfolio margin info., they do mention that in the ad. I still see it as a fairly big gamble, that I question the ethics of promoting in an ad.

 

[rew]

I do question the wisdom of such an ad. Having that much buying power in my IB account is all very well and good but I'd be fool to try to use it all. One good March '09 style crash would wipe me out.

There are better ways to earn 25% a year. They are riskier than getting 3% from a bank but less risky than maxing out your margin.

 

[just21]

Can you scan the advert and post it here? thanks

 

[r-in]

Sorry, no scanner here. You may be able to find it on the futures website, or go to a bookstore and find the current issue. Sorry

 

[DAV]

Quote from tango29:

I wondered about the possibility of finding stocks paying 5% that were fairly good companies.

You can use the TWS market scanner to search for stocks with high yields, use the "Top Dividend Yield" parameter.

 

[Hurricane]

I saw the ad and was surprised as well that IB was using it. The whole strategy falls apart when interest rates go up resulting in a higher margin rate and a reduced price of your securities.