Why Deleveraging Still Rules Markets in 2013
By A. Gary Shilling Jan 27, 2013
Deleveraging: The financial sector began its huge leveraging in the 1970s, as the debt-to-equity ratios of some financial institutions leaped. The household sector followed in the early 1980s. That’s when credit-card debt ballooned and mortgage down payments dropped from 20 percent, to 10 percent, to 0 percent. We even reached negative numbers at the height of the housing boom as home-improvement loans added to conventional mortgages pushed debt-to-equity ratios above 100 percent.
10 Years
The deleveraging process for both of these sectors has begun, though it has a long way to go to return to the long-run flat trends. I foresee about five more years of deleveraging, bringing the total span to about 10 years, which is about the normal duration of this process after major financial bubbles.
No comments:
Post a Comment