Read? Playing The Game of Leverage (5)
Unexpectedly, you may become poorer in the next Bear when you fail to leave the party before Mid-night clock strikes at 12.
You may heard it many times that Leverage is a double-edged sword and it can kill! But, may be it is not leverage that kills. It is Deleveraging that actually kills.
Deleveraging is an attempt to decrease or pay off debts or loans. If people or instituitions are unable to pay off their debts quick enough; they will be at risks of defaulting or become bankrupt.
When the Bear market endures, more and more peoples and instuitions will become unable to loan back and refinance. Soon, they will be forced into more deleveraging at higher losses and coupled with more mass redemptions coming from the retail investors. As a result the market will collapse. When market collapses, it will become the "Mother of All Margin Calls" and Market Crash happens!
When you have not deleverged quick enough when Market Crash, you may become poorer!
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