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By Jason Stipp | 09-11-2009 11:06 AM

Muldowney: Gauging Risk After Lehman

Three years ago, times were good, money was cheap, and markets were expanding. We took an awful lot for granted.

Stipp: What is your take and perspective on risk going forward? Given the last year that we've had in the markets, has that changed at all?

Muldowney: Well, our outlook has changed. But I think it's important, before we get to the change in risk, to identify how that extra risk got built into the marketplace.

I would first suggest that if we were to look back three years ago, pretty much everybody in the marketplace felt pretty comfortable. We had taken an awful lot for granted.

Markets were good. Money was cheap. Markets were expanding. More people were enjoying homeownership with low-cost money and interest rates certainly that were as low as they were.

Many people, including several of the private equity firms or hedge funds used that borrowed money to buy stocks. Individual homeowners used those things to either buy homes or to finance their cars. The colloquial expression is they were using their houses as an ATM.
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