In more good news that markets work just fine without a lot of intervention:
Hedge funds cut leverage by almost half last year, according to new figures from Britain’s financial regulator, and borrowing has fallen even further since then.
Leverage dropped to 1.15 times assets in October, according to the Financial Services Authority. The figure was about 1.9 times in October 2007, and was 1.44 times in April. What’s more, hedge funds cut their borrowing even faster than their lenders required.
The FSA report also shows that hedge funds have more “dry powder” since it began measuring four years ago.
The FSA, which measures leverage in the industry twice annually, surveyed hedge funds managing some US$595 billion in assets, held in 13 banks, from around the world.
The best part about the modern modern, the quick transfer of news and technological advances? Perhaps our downturns are a bit quicker than they once were. The world is de-leveraging a mountain of debt in a very short period of time. The pain that comes with it is horrible, but anything is better than death by a million cuts….The market is getting rid of its excesses and that is a good thing.
Mr. Roche is the Founder and Chief Investment Officer of Discipline Funds.Discipline Funds is a low fee financial advisory firm with a focus on helping people be more disciplined with their finances.
He is also the author of Pragmatic Capitalism: What Every Investor Needs to Understand About Money and Finance, Understanding the Modern Monetary System and Understanding Modern Portfolio Construction.