I’m also an Adviser.
The leveraged gamblers are going to die a grisly death, and good riddance. Chalk up yet another benefit of this disaster!
This country, the markets, the people.... all needed a reality check. Here it is.
Can anyone summarize?
I am sort of laughing at the finacial experts adamant recommendation that we have to “fix” the problem of the highly leveraged hedge funds. I am not saying he is wrong, I am just saying that should that be fixed, the financial crooks will just find the next best loophole to feed their avarice and they will blow another bubble somewhere else, leaving the middle class holding the bag as usual.
He is talking about Hedge Funds being leveraged 10x and more. He is talking about stock buy-backs rather than companies re-investing funds.
From what he said, the DOW should never have gone above 20,000. The S&P 500 should never have gone above 2,200. All the rest of it was “funny money”. Not profit or true growth.
Indeed, President Trump’s de-reguations and tax cuts had a massive growth affect on our nation, which is why unemployment fell and wages rose and businesses thrived. But stock valuations were still 30% over reality due to Hedge Fund leveraging and massive stock buy-backs.
It was all funny money. The markets are now falling down to around where our healthy economy would have them. Only our economy is no longer healthy. It is being body-slammed into a sharp recession by the halt in world commerce brought on by the Coronavirus, unless you are a toilet paper manufacturer.
So the market is likely to drop at least another 20% from here, and possibly 30% I am no financial expert and I don’t want to pretend I am. I am just hearing what these experts are saying and they are saying there was a lot of funny money in the markets. You get a $50 billion hedge fund leveraged to 10x and they are adding a half-billion dollars “funny money” to stock prices. No wonder the Dow Jones went from 7,000 in 2009 to 30,000 in 2019.
It always struck me as illogical. Now it makes sense. In 2006 it was the housing bubble. Today it is insane leverage. Thank goodness it is just the off balance sheets doing this and not the banks themselves, or we would be heading to 1929 again.