> Was going to say something very similar. His content is usually great, but the writing style doesn't appeal to me because of the verbosity. It generally doesn't keep me from reading them if the topic is interesting to me though.
I appreciate that patio11 states things that might seem obvious to someone knowledgeable in a field. It reminds me of [WP:Obvious] from back when I started using Wikipedia. It states:
> State facts that may be obvious to you, but are not necessarily obvious to the reader. Usually, such a statement will be in the first sentence or two of the article.
This is such a difficult thing to do "correctly" because there is a danger as you see on the wikipedia link that you might start stating that the sky is blue. (Meta: Did I just do that?)
This is what patio11 does so well.
I mean this is pretty early on in the article:
> Every business has a balance sheet, which contrasts its assets (valuable things it owns) against liabilities (valuable things it owes to other people). The difference between assets and liabilities is equity.
> Financial businesses will frequently have non-financial assets and liabilities. Ignore those for the sake of simplicity. Ignore the nice building, the computers, the payroll due on Friday for work which has already been completed. Focus just on the financial assets and liabilities, things like “mortgages our bank owns” (asset) and “deposits from customers” (liability).
> Leverage is the ratio of your liabilities to your equity. Simple division. Fourth grade math. If you have $110 million in assets and $100 million in liabilities you, by subtraction, have $10 million in equity against your $100 million in liabilities. You are said to be levered 10:1.
Now if I were to edit this,
I'd probably go off a tangent at this point.
I would say something silly like
You have deposits from customers worth USD 100M.
You loaned out USD 110M.
What happens if, of the people you loaned your money to, half of them disappear with your money?
Now, your assets are only USD 65M.
However, your liabilities are still USD 100M.
Your equity is USD 65M - USD 100M = a negative USD 35M!
You are properly screwed.
In fact, you'd be screwed if your loans soured by anything greater than your equity of USD 10M,
let say USD 11M.
Lets say your borrowers are unable to repay you any more than USD 99M of the USD 110 they owe you.
Your equity is USD 99M - USD 100M = - USD 1M.
What just happened?
I took you, the unsuspecting reader, on my boat and threw you out in the middle of the ocean.
I've done you a disservice.
Did you expect to read that tangent after the quote I had from patio11?
Probably not.
Did you expect to see a concept like negative equity and negative leverage if you're just learning about leverage?
Unlikely.
In any case, the fact that I feel dissatisfied just writing this comment is a testament to just how difficult it is to explain something. Even when the concept I am trying to explain is nothing more than "it is difficult to explain something in brief".
I appreciate that patio11 states things that might seem obvious to someone knowledgeable in a field. It reminds me of [WP:Obvious] from back when I started using Wikipedia. It states:
> State facts that may be obvious to you, but are not necessarily obvious to the reader. Usually, such a statement will be in the first sentence or two of the article.
https://en.wikipedia.org/wiki/Wikipedia:Writing_better_artic...
This is such a difficult thing to do "correctly" because there is a danger as you see on the wikipedia link that you might start stating that the sky is blue. (Meta: Did I just do that?) This is what patio11 does so well.
I mean this is pretty early on in the article:
> Every business has a balance sheet, which contrasts its assets (valuable things it owns) against liabilities (valuable things it owes to other people). The difference between assets and liabilities is equity.
> Financial businesses will frequently have non-financial assets and liabilities. Ignore those for the sake of simplicity. Ignore the nice building, the computers, the payroll due on Friday for work which has already been completed. Focus just on the financial assets and liabilities, things like “mortgages our bank owns” (asset) and “deposits from customers” (liability).
> Leverage is the ratio of your liabilities to your equity. Simple division. Fourth grade math. If you have $110 million in assets and $100 million in liabilities you, by subtraction, have $10 million in equity against your $100 million in liabilities. You are said to be levered 10:1.
Now if I were to edit this, I'd probably go off a tangent at this point. I would say something silly like You have deposits from customers worth USD 100M. You loaned out USD 110M.
What happens if, of the people you loaned your money to, half of them disappear with your money? Now, your assets are only USD 65M. However, your liabilities are still USD 100M. Your equity is USD 65M - USD 100M = a negative USD 35M! You are properly screwed.
In fact, you'd be screwed if your loans soured by anything greater than your equity of USD 10M, let say USD 11M. Lets say your borrowers are unable to repay you any more than USD 99M of the USD 110 they owe you. Your equity is USD 99M - USD 100M = - USD 1M.
What just happened? I took you, the unsuspecting reader, on my boat and threw you out in the middle of the ocean. I've done you a disservice. Did you expect to read that tangent after the quote I had from patio11? Probably not. Did you expect to see a concept like negative equity and negative leverage if you're just learning about leverage? Unlikely.
In any case, the fact that I feel dissatisfied just writing this comment is a testament to just how difficult it is to explain something. Even when the concept I am trying to explain is nothing more than "it is difficult to explain something in brief".