...the relentless bull market might lose some steam? The US = an economy of Fed-printed, hedge-fund driven asset bubbles (sorry, I almost forgot the idiot homeowners)
They pissed Obama off so the PPT is going to taken away. So no more cheap money so that banks can inflate markets and bonus checks. He is mad because of the Brown situation, he is taking it personally.
Speaking as a Canadian who worked for a large investment bank in NYC for years fleecing American state pension funds, I can assure you that Obama is doing the right thing. He is taking away my former colleagues "right" to party irresponsibly with the public's money. The US is so totally beholden to Wall Street jerkoffs, it blows my mind. Americans used to vote to defend the very policies that we used to clean out their pension funds. A nation of sheep.
Acttually, providing leverage to hedge funds that trade in easy-to-value securities, such as equity, is a low risk business model. Any loans are guaranteed by the fund's assets and the bank force the fun to liquidate positions if the drawdown is too large. Providing leverage is way safer than keeping tranches of CDOs on the books or even financing acquisitions.
I think you make a great point. Leverage in highly liquid stuff is ok. Stocks, futures, options. its the credit instruments that are the real problem. Eventully we need to take more risks with equity than with debt,
How on earth could we have gone through dot.bomb and Enron and still have people thinking equities are "easy to value"?
I think he may be doing the right thing, but at the very wrong time. First get unemployment to 6% then take the cocaine away. Go to recovery.gov. Under his watch, he is responsible for 37B of issued funds in 1 year's time. We need jobs stimulus, not policies that prevent bank recapitalization.
Good point! I was not talking of some fundamental fair value. I was talking of the existance of a market price. As long as the value of assets the hedge fund holds can be reliably estimated, the bank can control risk associated with providing leverage... and reduce the amount of leverage provided if the value of fund's assets dangerously decline. The same way as retail brokers do. To mitigate potential event like Enron collapse, the bank will likely provide higher leverage on a well-diversified portfolio and may provide zero leverage if the fund holds only one stock.