"If you are leveraged 33-1, and you're holding long-term securities and using short-term indebtedness, and then there's a run on the bank — which is what happened to Bear Stearns — how can you blame that on efficient market theory?" But then we started talking about bubbles.
"When you are leveraged twenty-five to one, if your assets fall by five per cent, you are technically insolvent," he said.
But, he said, "If you have just 10 names and one blows up, you have less risk than if you are highly leveraged and you don't really understand the other companies well".
"You're either on the side of the lever where you're getting leveraged away," he says, "or you're providing the software in which you're going to be insanely rich".
Maybe greed – and the fact that the more leveraged you were the fatter the profits you could make, and then pay yourself – blinded them to the risks they were taking.
You need some leveraged earning power going forward even if you believe that the recession will last longer.
"Anytime you have the assets underperforming the hedges and they are leveraged, you basically have two options," Douglas A. Dachielle, chief executive of First Principles Capital Management, told The Times.
"Anytime you have the assets underperforming the hedges and they are leveraged, you basically have two options," said Douglas A. Dachille, chief executive of First Principles Capital Management.
"Further, even if you put down a healthy twenty percent, you are still leveraged five to one.
