Tag Archives: loans

Hedge-Fund Leverage Rises to Most Since 2004 in New Year

According to Bloomberg’s Whitney Kisling, hedge funds are borrowing more to buy equities just as loans by New York Stock Exchange brokers reach the highest in four years, signs of increasing confidence after professional investors trailed the market since 2008.

Leverage among managers who speculate on rising and falling shares climbed to the highest level to start any year since at least 2004, according to data compiled by Morgan Stanley. Margin debt at NYSE firms rose in November to the most since February 2008, data from NYSE Euronext show.

The rising use of borrowed money shows that everyone from the biggest firms to individuals is willing to take more risks after missing the rewards of the bull market that began in 2009. While leverage means bigger losses should stocks decline, investors are betting that record earnings and valuations 9.8 percent below the six-decade average will help push the Standard & Poor’s 500 Index toward the record it set in October 2007.

“The first step of increasing risk is just going long, the second part of that is levering up in order to go longer,” James Dunigan, who helps oversee $112 billion as chief investment officer in Philadelphia for PNC Wealth Management, said in a Jan. 8 telephone interview. “Leverage increasing in the hedge-fund area suggests they’re now getting on board.”

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LIBOR SCANDAL: Where was The Regulators?

What was the regulators’ role in these financial activities? How could there be a such a devastating scandal that affects millions of people if we have “regulators”?As the scandal been revealed, the spotlight now turned to the regulators. Paul Tucker, a deputy governor  at  the Bank of England, will testify these information on today. This article, by New York Times journalist Mark Scott, will give you more insight on this issue.

The scandal over the manipulation of global interest rates until now has mostly put bankers in the spotlight. But the focus on Monday will turn to the regulators, both on what they did and what they did not do.

Paul Tucker, a deputy governor  at  the Bank of England, will give evidence on whether senior government officials put pressure on Barclays to lower its submissions to the London interbank offered rate, or Libor. Barclays agreed in late June to pay some $450 million to settle accusations from United States and British authorities that its traders and senior executives had manipulated the rate, which underpins trillions of dollars of corporate loans, home mortgages and derivatives around the world.

Mr. Tucker’s testimony could put him at loggerheads with Robert E. Diamond Jr., the former chief executive of Barclays, who told the same committee last week that the Bank of England, as well as the Financial Services Authority of Britain and the Federal Reserve Bank of New York, had repeatedly been informed about the issue, but had not moved to stop it.

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