The Memo by Howard Marks cover image

The Impact of Debt

The Memo by Howard Marks

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Leverage and Capital Destruction

Lenders reducing their lending and requesting repayment can have negative consequences for borrowers, leading to extreme highs and painful losses. Excessive leverage can result in significant losses, as demonstrated by John Mills' quote that panics do not destroy capital but reveal previous destruction caused by taking on excessive leverage. It is essential to optimize leverage, not maximize it, since leverage amplifies gains but also magnifies losses.

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