Author Topic: Huge amounts of non-recourse leverage possible?  (Read 2202 times)

LongHaul

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Huge amounts of non-recourse leverage possible?
« on: December 06, 2018, 08:19:42 AM »
Can anyone think of a strategy to take on a huge amount of non-recourse leverage with little down and invest in stocks?
The only thing I could think of was Leaps.


KJP

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Re: Huge amounts of non-recourse leverage possible?
« Reply #1 on: December 06, 2018, 08:22:52 AM »
Can anyone think of a strategy to take on a huge amount of non-recourse leverage with little down and invest in stocks?
The only thing I could think of was Leaps.

1. Start an asset management firm and charge incentive fees.  Losses on LP capital are non-recourse to you, but you get a nice slice of the upside on any increase in value on that capital. 

2. Invest in the equity of highly levered firms.  Small changes in their enterprise value will lead to large changes in their equity prices, which would be similar to the effect on the value of your portfolio of levering your own balance sheet to buy unlevered firms, with the benefit that debt at the firm level is non-recourse to you.
« Last Edit: December 06, 2018, 08:36:28 AM by KJP »

bizaro86

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Re: Huge amounts of non-recourse leverage possible?
« Reply #2 on: December 06, 2018, 08:29:26 AM »
Way out of the money options are the biggest amount of non-recourse leverage possible, I think.

Whether that is a good idea....

BG2008

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Re: Huge amounts of non-recourse leverage possible?
« Reply #3 on: December 06, 2018, 08:38:44 AM »
Can anyone think of a strategy to take on a huge amount of non-recourse leverage with little down and invest in stocks?
The only thing I could think of was Leaps.

1. Start an asset management firm and charge incentive fees.  Losses on LP capital are non-recourse to you, but you get a nice slice of the upside on any increase in value on that capital. 

2. Invest in the equity of highly levered firms.  Small changes in their enterprise value will lead to large changes in their equity prices, which would be similar to the effect on the value of your portfolio of levering your own balance sheet to buy unlevered firms, with the benefit that debt at the firm level is non-recourse to you.

KJP,

1. In theory true.  In practice you have to be very very good at sales to pull it off.  Judging from most people on this board, we're mostly doers rather than sales guys. 

KJP

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Re: Huge amounts of non-recourse leverage possible?
« Reply #4 on: December 06, 2018, 08:48:47 AM »
Can anyone think of a strategy to take on a huge amount of non-recourse leverage with little down and invest in stocks?
The only thing I could think of was Leaps.

1. Start an asset management firm and charge incentive fees.  Losses on LP capital are non-recourse to you, but you get a nice slice of the upside on any increase in value on that capital. 

2. Invest in the equity of highly levered firms.  Small changes in their enterprise value will lead to large changes in their equity prices, which would be similar to the effect on the value of your portfolio of levering your own balance sheet to buy unlevered firms, with the benefit that debt at the firm level is non-recourse to you.

KJP,

1. In theory true.  In practice you have to be very very good at sales to pull it off.  Judging from most people on this board, we're mostly doers rather than sales guys.

Agreed.  You can't take advantage of the leverage unless you have the scale to cover the overhead costs, and, in general, you can't get scale unless you can sell.

Uccmal

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Re: Huge amounts of non-recourse leverage possible?
« Reply #5 on: December 06, 2018, 09:21:31 AM »
Mortgage?  At least until renewal. 

If we could access large amounts of non recourse leverage, then everyone could. 

Practically speaking lines of credit have worked well for me for nearly 20 years right through the financial crisis.  They were never cut or frozen.  I dont really use them and the amount of leverage is not huge.  Of course, you need to pay interest which is quite high relative to a margin account. 
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Gregmal

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Re: Huge amounts of non-recourse leverage possible?
« Reply #6 on: December 06, 2018, 09:30:13 AM »
Maybe not what you're looking for, but most(here, not generally speaking) can probably get a no interest for 12-18 month credit card with a 25-50K limit. Send 25K to a related Paypal account as payment for services. This works around the cash advance fee. You pay about 3% to paypal. Send the proceeds to a bank account. Wire to brokerage account. You can then also margin this money further if desired. After 12-18 months worst case do a balance transfer to another 0 interest promo card.

I'm not advocating this either, but if you are looking to leverage your investments with borrowed money...

TwoCitiesCapital

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Re: Huge amounts of non-recourse leverage possible?
« Reply #7 on: December 06, 2018, 09:50:52 AM »
Maybe not what you're looking for, but most(here, not generally speaking) can probably get a no interest for 12-18 month credit card with a 25-50K limit. Send 25K to a related Paypal account as payment for services. This works around the cash advance fee. You pay about 3% to paypal. Send the proceeds to a bank account. Wire to brokerage account. You can then also margin this money further if desired. After 12-18 months worst case do a balance transfer to another 0 interest promo card.

I'm not advocating this either, but if you are looking to leverage your investments with borrowed money...

While no doubt a riskeir option, I do this all the time. Just rolled 50% of my car onto an offer that was 0% interest for 18 months (w/ a 3% charge). The 2% rate that approximates is far less than the car loan and I was going to have the whole car paid off in the next 12 months anyhow.

Also, seconded on the options opinion which is more expensive, but truly non-recourse

oddballstocks

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Re: Huge amounts of non-recourse leverage possible?
« Reply #8 on: December 06, 2018, 10:03:30 AM »
What if you mortgaged your house, put it in a margin account, and with that account purchased far OTM calls.  That seems to be the best way to get HUGE leverage.

It also ensures there will be no assets to fight over in divorce court either.
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Jurgis

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Re: Huge amounts of non-recourse leverage possible?
« Reply #9 on: December 06, 2018, 10:30:42 AM »
What if you mortgaged your house, put it in a margin account, and with that account purchased far OTM calls.  That seems to be the best way to get HUGE leverage.

It also ensures there will be no assets to fight over in divorce court either.

Or you gonna be multibillionaire instantly (but then the divorce will suck). YOLO!  8)
"Before you can be rich, you must be poor." - Nef Anyo
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