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Leverage
Leverage The danger of excessive debt is not well understood. For example selling puts or calls seems like a great strategy as 90% expire worthless. But if you write naked options and the market moves dramatically against you, then you lose many thousands to make a few hundred. Ouch! Buying stocks on margin multiplies the win if you guess right. but if you guess wrong you have to sell at the bottom of the market. Then you lock in the loss. In 2008 my stock account fell to one third of its prior high. Ten years later it is back higher than before and thousands more.... My brother was leveraged in real estate. He lost all his houses and went bankrupt. Leverage from too much speculation killed him. Warren Buffett famously observed: "You don't know who is swimming naked until the tide goes out." Don't gamble excessively with leverage. Another proverb I like: Don't risk the essential to obtain the superfluous. |
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sage advice
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The base problem with the 2008 "recession" was that the protections that had been put in place after the 1929 crash were eventually eliminated. The banking and insurance industries bought politicians to loosen up regulations and finally stuck a dagger in the Glass-Steigel Act when Bill Clinton signed off toward the end. Presumably as a deal as part of the "cigar" episode. Turns out we all got screwed in that deal. When the going gets weird, the weird turn pro. The only thing we have to fear is fear itself.
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The anti-regulation crew is back at watering down the protections for financial crashes.
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Subprime loans with little equity helped fuel the blowout in 2008...
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