Hedge Funds Borrow the Most Since 2007 to Purchase U.S. Stocks

A

ASusilovic

Feb. 24 (Bloomberg) -- Hedge funds increased their net leverage in January to the highest level since October 2007, as they took advantage of record-low borrowing costs to bet that the U.S. equity rally will continue.

Debt at margin accounts at the New York Stock Exchange minus cash and unused credit from margin accounts climbed to $46 billion, according to data released by NYSE yesterday. Hedge funds had $290 billion of debt from margin accounts in December, the largest sum since Lehman Brothers Holdings Inc. collapsed in September 2008.

“It makes a lot of sense given the low cost of borrowing and some equities’ valuations,” said Patrick Armstrong, who helps manage $356 million in multiasset strategies at Armstrong Investment Managers LLP in London. “There is a capital- structure arbitrage to be made by buying stocks with leverage.”

http://noir.bloomberg.com/apps/news?pid=20601087&sid=a.zOaZV1dx10&pos=5

Murphy´s law: this will end in disaster! I think uncle helicopter Ben and his braniacs forgot abou geopolitics when they thought about their idiotic plan to "inflate" not only the US but every other country out there, too. My regards, Ben, you are the WORST central bankster ever born! :cool:
 
Quote from ASusilovic:
---- Hedge funds increased their net leverage in January to the highest level since October 2007....
----bet that the U.S. equity rally will continue.
----Debt at margin accounts....largest sum since Lehman Brothers Holdings Inc. collapsed in September 2008.
----It makes a lot of sense....
----capital- structure arbitrage....
----this will end in disaster!
More...
1) ?....you're back! :eek:
2) Tanned and rested? :confused:
3) To revisit late-2007 again, nice, very nice. :D
 
Quote from ASusilovic:

Feb. 24 (Bloomberg) -- Hedge funds increased their net leverage in January to the highest level since October 2007, as they took advantage of record-low borrowing costs to bet that the U.S. equity rally will continue.

Debt at margin accounts at the New York Stock Exchange minus cash and unused credit from margin accounts climbed to $46 billion, according to data released by NYSE yesterday. Hedge funds had $290 billion of debt from margin accounts in December, the largest sum since Lehman Brothers Holdings Inc. collapsed in September 2008.

“It makes a lot of sense given the low cost of borrowing and some equities’ valuations,” said Patrick Armstrong, who helps manage $356 million in multiasset strategies at Armstrong Investment Managers LLP in London. “There is a capital- structure arbitrage to be made by buying stocks with leverage.”

http://noir.bloomberg.com/apps/news?pid=20601087&sid=a.zOaZV1dx10&pos=5

Murphy´s law: this will end in disaster! I think uncle helicopter Ben and his braniacs forgot abou geopolitics when they thought about their idiotic plan to "inflate" not only the US but every other country out there, too. My regards, Ben, you are the WORST central bankster ever born! :cool:
More...

As violent as the meltdown in 2008-09 was, it's almost beyond imagination how it will unfold in the not so distant future. There is unbounded "moral hazard complacency" priced into these markets; as if there is no possible way for central banks to lose control of the situation.

Also implied is the notion that all bad bets will be made whole if they are concentrated enough between all the biggest players. I think that you can only go to the well so many times...
 
Everyone sees the risks; Bernanke included. Don't kid yourselves.

The central bank just thinks it's a risk that had to be taken.
 
As of the end of December, total NYSE margin debt of $276.6 billion hit a fresh post-Lehman high, as increasingly more investors continue to purchase securities on margin (i.e., debt).

The $2.5 billion rise from November margin levels is the highest since September 2008, and $103 billion from the market lows of March 2009.

That said, margin fever still has a way to go and it could easily reach the June 2007 all time high of $381 billion, a little over $100 billion from here.

http://www.zerohedge.com/article/ny...ost-lehman-high
 
Quote from olias:

Everyone sees the risks; Bernanke included. Don't kid yourselves.

The central bank just thinks it's a risk that had to be taken.
More...

Are you paid for your non-stop shilling?
 
Wait a sec, I thought hedge funds weren't the problem during the crisis? How is hedge fund leverage a disaster, based on the 2008 experience?
 
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