What the Heck Is Going On?
I went to bed last night after a hard push to get a new e-book up, and this morning I wake up to find the world's gone crazy. I mean, I've heard of GameStop, and I think I've seen one or two in town (although it's also possible that I saw them while on the road to one or another convention, back in the day when those were still happening and we were on the road for a good chunk of every year), but I never thought of the company as something that could make the financial markets go completely nuts.
I'll admit I don't know a whole lot about high finance. I've heard about selling short and have a vague idea of how it works in stock speculation, and I do know about fundamentals and the perils of bubbles in a market, which is just enough to know this is alarming, quite possibly a disaster in the making. We could see these hedge funds collapse the way the investment banks collapsed back in 2008 during the collapse of the housing bubble.
One thing I'd really like to know: how much are these hedge funds the plaything of the ultra-wealthy, and how much are they tied to the 401k's and other investment instruments that ordinary working stiffs use to sock away money for their retirements? A multi-billionaire can lose half the value of his investments, and he may have to sell his house on the Rivera and one of his prized Bentleys, but he's not going to be missing any meals. "Joe the Plumber" loses half the value of his 401k and he may well be looking at retiring to a cardboard box under an overpass, or hoping his kids will take him in, especially if he's already in his 50's and doesn't have the time to recoup those loses.
Worst case, we could see an unraveling as bad as what happened to the economy in the wake of the 1929 crash, which was largely the product of buying stocks on margin. And it's important to note that, in spite of the impression we often get from school, the crash wasn't one big event, but a process over several months, which included several rallies that made people think prosperity was coming back.
I'll admit I don't know a whole lot about high finance. I've heard about selling short and have a vague idea of how it works in stock speculation, and I do know about fundamentals and the perils of bubbles in a market, which is just enough to know this is alarming, quite possibly a disaster in the making. We could see these hedge funds collapse the way the investment banks collapsed back in 2008 during the collapse of the housing bubble.
One thing I'd really like to know: how much are these hedge funds the plaything of the ultra-wealthy, and how much are they tied to the 401k's and other investment instruments that ordinary working stiffs use to sock away money for their retirements? A multi-billionaire can lose half the value of his investments, and he may have to sell his house on the Rivera and one of his prized Bentleys, but he's not going to be missing any meals. "Joe the Plumber" loses half the value of his 401k and he may well be looking at retiring to a cardboard box under an overpass, or hoping his kids will take him in, especially if he's already in his 50's and doesn't have the time to recoup those loses.
Worst case, we could see an unraveling as bad as what happened to the economy in the wake of the 1929 crash, which was largely the product of buying stocks on margin. And it's important to note that, in spite of the impression we often get from school, the crash wasn't one big event, but a process over several months, which included several rallies that made people think prosperity was coming back.