What the hell is a pension fund doing buying bonds on margin?
Sure, you can make more money when the price of an asset is increasing by buying it on margin, but the problem is if the price of the asset decreases, a margin call will wipe you out. I'm somewhat aghast that pension funds are allowed to use margin at all, and I'd really like to know what their leverage ratio was on these "investments".
What we did in 2008 is to paper over too much debt with more debt. Kinda like fixing a hangover by opening another bottle of booze. You'll feel better, but eventually your liver will give out...
"margin calls among UK pension funds"
What the hell is a pension fund doing buying bonds on margin?
Sure, you can make more money when the price of an asset is increasing by buying it on margin, but the problem is if the price of the asset decreases, a margin call will wipe you out. I'm somewhat aghast that pension funds are allowed to use margin at all, and I'd really like to know what their leverage ratio was on these "investments".
Not to mention hedging the investment risk of margin buying with derivative contracts.
Didn't we learn in 2008 that such strategies were a really really BAD idea?
Apparently we did not learn a damn thing in 2008.
What we did in 2008 is to paper over too much debt with more debt. Kinda like fixing a hangover by opening another bottle of booze. You'll feel better, but eventually your liver will give out...