Tornado Alley (PROG)

[redwards]

fwiw , its called financial leverage, 10:1 or 20;1 or 30;1.

Simply take a $1MM equity position and buy 10, 20, or 30 MM in debt securities with the equity of 1MM.

Just for demonstration sake, drop the value of your 10, 20 or 30 MM portfolios by 10%. In each case look at what happens to your 1MM equity.

Once you do the simply math, ( accounting term: financial leverage) then you will be enlightned .

"did you notice in that link it said that AIG could take a $9+ billion hit.....but, AIG is over $100 billion.....

so, a less than 10% hit puts them out of business? "

answer Yes, because of Financial Leverage.