ET Podcast #8 – Leverage and Its Discontents

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Three blow-ups in three months: Archegos, Greensill, and Melvin Capital.

What do they have in common?

Insane leverage employed to maximize private gain, provided by lenders that can socialize losses.


ET Podcast #8 – Leverage and Its Discontents

We reference three archived ET notes in the podcast, linked here and taken out from behind the paywall.

The Grammar of Risk

Leverage / Illiquidity /Concentration

In a normal market you can handle two. In a bad market you can’t.

By Our Own Petard

We will never – can never – be aligned with our agents.

Sorry.

Oh hell, Martha, go ahead and burn yourself if you want to.

We all need some burns. But they have to be OUR burns


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Mike Jones
7 days ago

> Insane leverage employed to maximize private gain, provided by lenders that can socialize losses.
 
A spot-on observation like that deserves immediate translation into Esperanto:
 
“Freneza levilado utiligita por maksimumigi privatan akiron, provizita de pruntedonantoj kiuj povas socialigi siajn perdojn.”

Fabrizio Ladi Bucciolini

I found the discussion interesting thank you. I somehow feel that the narrative about the “private” investor coming into the market to provide idiosyncratic opportunities to be a bit naive! we should improve the analysis: If people have not worked out that Robin hood and co. we should help: they are the best allies of Wall Street and they are not a casual occurrence, they are the conduit from what once was a bucket shop to financial markets. the narrative about them needs to be rectified: these tools that are simply luring into the game the greater fools and allowing them to leverage beyond this solar system… happy Easter everyone

Mike Jones
4 days ago

When you’re among wolves, you must bay at the moon.

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