One of the techniques prevalent in the market is Short Selling. This is done by a lot of savvy investors, hedge funds, etc. to protect their long term investment or “hedging” their bets with offsetting positions. In a nutshell, this is what happens:
1. A Broker lends you the stock
2. You sell the shares and the proceeds go into your account
3. When the prices go down, you then buy the stock at a lower price
4. You then return the shares that you “borrowed” to your stock broker
You end up making money (sometimes small fortunes) on something you never owned. I have always thought that those who short sell are a big cause of a market downturn, not the only cause but one to consider. The market can be manipulated by smear campaigns by short sellers. Also, why allow someone to make a big profit on something they never owned? This never made any sense to me.
I don’t know what happened to our market. To blame it all on the sub-prime mortgage industry, who knows?
Glenn Becks says: "Our current crisis was caused by politicians, both Democrats and Republicans, who perverted the American Dream by treating home ownership as an undeniable right rather than what it really is, a privilege. President Bush aggressively promoted the benefits of home ownership through various policy positions including a reckless down-payment initiative for some homebuyers and praised Fannie Mae and Freddie Mac even after concerns about their accounting standards began to surface."
Donald Trump blames it all on the price of oil and he is actively buying property.
Right now analysts are looking into what caused this financial freefall.
