tag:blogger.com,1999:blog-5465015914589377788.post73319617323604176..comments2024-03-20T09:32:16.592-04:00Comments on Michael James on Money: What do “Black Swans” Mean for Investors?Michael Jameshttp://www.blogger.com/profile/10362529610470788243noreply@blogger.comBlogger4125tag:blogger.com,1999:blog-5465015914589377788.post-29831833465481771092011-12-13T23:18:23.791-05:002011-12-13T23:18:23.791-05:00@Anonymous: For the conditions you describe, a mod...@Anonymous: For the conditions you describe, a modest amount of leverage can make sense. I would add the condition that the person's income is enough to service the debt payments. This would usually be the case at 1.25:1, but not always.Michael Jameshttps://www.blogger.com/profile/10362529610470788243noreply@blogger.comtag:blogger.com,1999:blog-5465015914589377788.post-3081596046628878342011-12-13T22:56:59.913-05:002011-12-13T22:56:59.913-05:00I don't think that leverage is inherently a ba...I don't think that leverage is inherently a bad idea. If someone has a stable income, has a reasonable knowledge of investing, has at least 20 years until retirement, and has been through a bear market without it bothering them, then leverage is an option to consider. However, I think the limit for most people, who meet the above criteria, should be 1.25:1 leverage. And getting information on leverage is not easy.Anonymousnoreply@blogger.comtag:blogger.com,1999:blog-5465015914589377788.post-76583102140930555742011-12-13T19:11:32.320-05:002011-12-13T19:11:32.320-05:00@Gene: Back in the dot-com era I worked with many...@Gene: Back in the dot-com era I worked with many people who were millionaires on paper but never cashed out. This is different from destroying your finances with leverage, but it is similar in that the problem was that they took on way too much risk.<br /><br />I agree that 2:1 leverage is plenty to make the risk of ruin too high. The 20:1 or 30:1 range is best for gambling with other people's (taxpayers') money.Michael Jameshttps://www.blogger.com/profile/10362529610470788243noreply@blogger.comtag:blogger.com,1999:blog-5465015914589377788.post-31750948146832784472011-12-13T18:58:55.641-05:002011-12-13T18:58:55.641-05:00Good advice. Pessimists have lower expectations, ...Good advice. Pessimists have lower expectations, but a more accurate view of life. I've heard enough of these "I used to be a millionaire, and then I had nothing" stories to know to avoid leverage.<br /><br />When you get into 20:1 or 30:1 leverage, you're into Bear Stearns or MF Global's league, but 2:1 is enough to destroy an individual investor.genehttps://www.blogger.com/profile/05608927986297939720noreply@blogger.com