Worst of all, the funds' reliance on leverage increases the scale of disaster when things go wrong.
Since investors must be compensated for bearing risk, higher leverage increases the required, or expected, return on equity.
At Morgan Stanley, we've dramatically brought down our leverage, increased transparency, reduced our level of risk and made changes to how we pay people".
Funding from the GPE should always help to leverage increases in domestic spending – rather than plug gaps left by deliberate government inaction.
Briefly, I agree with the conventional wisdom about reducing leverage, increasing capital requirements, and reforming compensation structures to try and make people act less myopically.
If used successfully, leverage increases the returns to owners, but it decreases the returns to owners when it is used unsuccessfully.
Where do you stand on the sentiment analysis debate, and do you think businesses prize reputation as an end in itself or are merely using it to leverage increased revenues?
Big crises follow prolonged episodes of exuberance, when people think there are only one-way bets (on emerging markets or anything else), leverage increases substantially and any downturn can quickly become a disaster.
First, leverage increases the risk of a capital call.
But epistemological leverage increases greatly if the utility function of the inspector is exogenously determined, as it often is.
