Clown-Free Zone... sorry, no clowns allowed Message Board

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Pastimes : Clown-Free Zone... sorry, no clowns allowed

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To: At_The_Ask who wrote (148092)	2/3/2002 4:59:28 PM
From: Tommaso	Read Replies (2) of 436258

Information from Galbraith's book, "The Great Crash": For some fascinating reading about the magic of leverage, try "The Great Crash 1929" by John Kenneth Galbraith. In 1927, mutual funds (known as investment trusts back then) were allowed to borrow to invest in a portfolio of common stocks. You could open the newspaper to see a list of prices for high-leverage trusts, low-leverage trusts or trusts without any leverage at all. In fact, by 1929, investment trusts were borrowing to invest in other investment trusts! Speculation was rampant. When October 29, 1929 came this scheme of cascading, leveraged investment trusts collapsed like a house of cards. Securities regulators learned how dangerous leveraging is when it gets out of control.

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