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Investment Analysis Clubs / Macro Economic Trends and Risks


Subject:  Re: Portfolio Strategy in a Global Down Draft Date:  9/15/2008  11:53 AM
Author:  WendyBG Number:  252009 of 536635

An excellent anaylsis, as usual.

One important factor that you left out:
Many of the large institutional investors are leveraged. Some of them are heavily leveraged. The "shadow banking system" involves trillions of dollars of borrowed money.

As the price of assets (bonds, stocks, commodities) drop, leveraged players may get margin calls. They may be forced to sell good assets to cover bad. The shadow money evaporates.

Less money = less bids on assets. This will cause the price of all leveraged assets to fall.

What is the only asset that isn't leveraged?


Real money, not borrowed money.

That is why the majority of my holdings are in cash or cash equivalents (FDIC insured CDs), and in TIPS and I-Bonds.

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