Wednesday, March 18, 2009

If you are interested in what caused the financial house of cards to fall... Watch This...

Hedge Funds and the Global Economic Meltdown from Judd Bagley on Vimeo.

Isn't it wonderful to know that there are some people out there who got all the money that was lost? It is also wonderful to know that these people caused 150 year old financial institutions to drown while our government stood by. It is also wonderful to know that the government didn't do anything because they were in the pocket of a few, rich and powerful hedge fund fellas. Ever wonder why anyone hasn't been arrested? No one committed a criminal act? NO ONE? HALF THE WORLD'S WEALTH IS GONE AND NO ONE HAS BEEN ARRESTED FOR IT?

Always remember this about the stock market: When someone loses money, someone else is finding it. The wealth wasn't lost, it was transferred to a few, literally a handful, of criminals who have so much power and money that our politicians are afraid of them.


Bill Hensley said...


I haven't watched the video yet (can't see it on the network at the office) but I want to react to one thing you said in your comments:

Always remember this about the stock market: When someone loses money, someone else is finding it.

That's not a completely accurate statement. The total net capitalization of all the stocks traded on Wall Street has declined precipitously in the past 18 months. That means the collective net worth of all the investors in the market has declined. Of course, some folks have surely bucked that trend, but the overall market has lost value. So if your investment portfolio was worth $10,000 in October 2007 and it's worth $5,000 today, it is not in general true that someone else has increased their net worth by $5,000.

But this is only your net worth "on paper." It's not a real loss until you sell it. Now, if you bought some stock for $10,000 and you later sold it for $5,000 you surely lost money. But even then it doesn't necessarily mean that someone else gained $5,000. They only do that if they buy it from you for $5,000, hold it until the price recovers to $10,000 and sell it to realize their gains. Of course, if they do that they took a financial risk by investing in the stock and they are rewarded if the stock price goes up. There's nothing unfair about that.

Again, I haven't seen the video and I'm not talking about hedge funds here. I'm just talking about owning regular securities like stocks and mutual funds, which is what most folks like you and me will have in our portfolios.

Seth Ward said...

True Bill... I suppose I should have clarified that as more figurative talk there. Also, mostly talking specifically about shorting, but even then, it isn't totally accurate. However, one could probably say, that no matter what, if someone loses money, some one makes money off the loss.

I suppose it were that accurate or predictable, I'm sure it wouldn't work.

Great stuff, thanks for the comment!

Bill Hensley said...

Ok, I watched the video. I don't have the financial knowledge or the context to really know what to think of this. I can't decide whether he sounds more like an investigative journalist or a conspiracy theorist. There are surely a number of contributing factors to the market collapse this past year. Doubtless poor regulation formed a part of it, but many smart people are also convinced that over-regulation played an equal or greater role.

From the evidence given here it seems clear that intentional naked short selling was the trigger for the Bear Stearns collapse, and it made somebody a lot of money. That shouldn't be permitted. On the other hand, Bagley himself calls Bear Stearns an "over-leveraged heap of oily rags", which certainly implies that they had already dug themselves into a pretty deep pit by poor financial decisions. If that's true I'm not too sympathetic toward them. In a free market you have to let people who screw up fail, for the larger good. If you protect them or prop them up you wind up making everyone pay for their mistakes, instead of letting them pay for their own mistakes.

I generally believe that the goal of regulation should be solely to ensure transparency, honesty and vigorous competition within a free market. I am firmly convinced that a properly functioning free market will always yield a better result that anything government meddling can accomplish. A bunch of regulators and Congressmen can never do as good a job of looking out for everyone's collective best interest as the summation of each individual's efforts to maximize their own returns, subject to the above-mentioned enforcement of transparency, honesty and vigorous competition.

Tully said...

Stunning...and criminal!