Comments on: Give ‘em Some Credit http://www.tasgall.com/2008/09/22/give-em-some-credit/ Peering into the Cauldron of the Gods... Wed, 28 Sep 2011 10:20:57 +0000 hourly 1 http://wordpress.org/?v=3.3.1 By: Jason G. http://www.tasgall.com/2008/09/22/give-em-some-credit/comment-page-1/#comment-1447 Jason G. Tue, 23 Sep 2008 12:25:07 +0000 http://www.tasgall.com/?p=662#comment-1447 From FT via Paul Kedrosky: "If i-banks cut leverage ratios from 30 times (or recent levels) to 20 times, this would trigger $6,000bn worth of asset sales." That would be 6 Trillion dollars of de-leveraging. As the brokers are going to reorganize as banks, you can pretty much plan for their leverage ratios to come down, whether by buying assets (buying mid-range banks) or selling their current holdings, or some combination of both. From FT via Paul Kedrosky:

“If i-banks cut leverage ratios from 30 times (or recent levels) to 20 times, this would trigger $6,000bn worth of asset sales.”

That would be 6 Trillion dollars of de-leveraging. As the brokers are going to reorganize as banks, you can pretty much plan for their leverage ratios to come down, whether by buying assets (buying mid-range banks) or selling their current holdings, or some combination of both.

]]> By: Jason G. http://www.tasgall.com/2008/09/22/give-em-some-credit/comment-page-1/#comment-1442 Jason G. Tue, 23 Sep 2008 04:17:24 +0000 http://www.tasgall.com/?p=662#comment-1442 I think you're right on target here... credit expansion is responsible for a lot of the rise in bull markets, so credit contraction weighs in with similar influence on the downside... In terms of stock markets, overshooting to the downside is just as common as overshooting to the upside... and I doubt that real estate would be any different. There are a few things we can do in light of such illumination... * Know that the market can go much lower than we anticipate (hedging strategies work well here) * Be ready with cash to buy what really interests us -- whether it is a condo in downtown Oslo, or a company that makes obscene profit margins * Keep our own debt and leverage to a minimum so we don't become one of the forced sellers. I think you’re right on target here… credit expansion is responsible for a lot of the rise in bull markets, so credit contraction weighs in with similar influence on the downside…

In terms of stock markets, overshooting to the downside is just as common as overshooting to the upside… and I doubt that real estate would be any different.

There are a few things we can do in light of such illumination…

* Know that the market can go much lower than we anticipate (hedging strategies work well here)

* Be ready with cash to buy what really interests us — whether it is a condo in downtown Oslo, or a company that makes obscene profit margins

* Keep our own debt and leverage to a minimum so we don’t become one of the forced sellers.

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