Wednesday, February 18, 2009

Joe Weisenthal does the Goldman math

Take a moment to consider the multiple layers of leverage in this story. First, you have Goldman's stock which was inflated by the bank's huge leverage. Then you're using that as collateral for margin loans, so more leverage. And then with that money, you're buying hedge fund and private equity stakes, which are levered still. Three layers of leverage. It doesn't take much to get wiped out when you're squeezing things that far.

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