If there was a decrease in the buying power of institutions with
long liability structures, we would see less long term investing in fixed income and equity investments.
Early adopters of new asset classes and
liability structures typically do well, but when they become mainstream, the dynamics can be ugly, as we learned in 2007 - present.
Weak Hands — no balance sheet or
short liability structures, have to make a certain return each year, less experience, leveraged; they can't live with short - term losses.
For borrowers with short - term or floating - rate debt, we believe that now is the time to analyze your balance sheet and determine whether your
current liability structure is appropriate for your situation.
That may seem small, but given all the errors that have occurred there, particularly from those that took on too much debt, it would have been valuable to spend more time guarding against
aggressive liability structures.
Insurance companies typically have more ways to lose money than banks, and potential cash flow mismatches in the longer
liability structure require more capital to fund potential losses.
Rationality will return when unlevered and lightly levered buyers, or buyers with
long liability structures (looks at the actuary) hold their nose, and step up and buy with real money, not short term debt.»
Repo funding is not a safe funding source during crises, and this is something that is not fixed from the last crisis, along with portfolio margining, and a few other
weak liability structures.
Updated daily, it takes into account day - to - day movements in market value compared to a company's
liability structure.
When I said that the cult of equity was dying, what I meant was that those investors and
those liabilities structures such as pension funds and insurance companies that have depended on a 6.5 % constant real return from stocks such as we've have had over the past century are bound to be disappointed.
Strong Hands — long
liability structures, excess capital, experienced, patient, never compelled to do anything; they can live with short - term losses.
It was also fascinating to consider why investors for a life insurance company, which has
a liability structure that would allow them to buy and hold temporarily distressed assets, does not do so.
Risk that the Feds should care about is the toxic mix of illiquid assets funded by liquid liabilities; long
liability structures r safe $ $
Because of the relative riskiness of the asset and
liability structures, including the greater length of guarantees made, insurance companies generally run at a higher ratio of book equity to assets.
But what if you were clever as a financial institution, and had
liability structures that were long, or distributed the risk of what you were doing back to clients.
Even if the majority of
the liability structure is long, if a significant part of it was short, or could move from long to short, that's enough to set the company up for a liquidity crisis of its own design.
With the longer
liability structures, and a highly competitive environment, the investment policy of most insurance companies is more aggressive than that of most banks.
When I think about REITs, I think about their asset -
liability structure.
My client was growing rapidly, and 30 % of
its liability structure was long because they wrote a lot of structured settlements.
Insurance companies have longer
liability structures, and they survive many situations that would otherwise kill a hedge fund.
I think the sentiment among many who have answered here (that there is not much incentive given
the liability structure in the US) is certainly correct, and it explains why chip and signature has gained some traction while chip and pin has not, but I think there is an additional element at play here.
With many investments, there is
a liability structure.
The liability structure being invested against is short (We could need this cash at any moment for business use!)
The liability structure is long, but well - defined, such as a bank or insurer that wants predictable income versus their liabilities, and so the game becomes maximize spread net of default costs, subject to matching asset and liability durations (and maybe partial durations if the liability stream is long).
No assets should be bought that
the liability structure of the bank can not hold until maturity.
The answer depends on
your liability structure.
I view Berkshire Hathaway as an insurance company that uses
its liability structure to fund its operating businesses.
Worse,
their liability structures are weak, and their leverage is high.
Can
the liability structure dramatically shorten?
Is
the liability structure long enough to support them?
We are experiencing goods and services price inflation, asset deflation, and a monetary system where the Fed is not increasing the monetary base, but the banks are expanding
their liability structures over the last year, but that may have finally peaked.
They wrote so much of them, that they comprised 25 % of
their liability structure.
But in theory it would make sense to do so; we have a long
liability structure.
There is some level of constraint from the spending rules employed by the endowments, particularly since 2008 - 9, when a number of famous endowments came to realize that there was
a liability structure behind them when they ran low on liquidity amid the crisis.
Finally,
the liability structure is longer for most insurers, making «runs» less likely.
Is the demand for investments that are optimal for entities with
your liability structure greater than the available investments to be had?
The other way to view it is how sticky
the liability structure is for the banks.
(Entities with longer
liability structures, like pension plans, endowments, and life insurers would become the new source of lending.