What Happened?

 Greed is not necessarily a bad thing.  Greed is what moved Thomas Edison to invent the light bub,, Henry Ford to produce the Model T, and Willis Carrier to invent air conditioning.

But, greed can be a bad thing.  It's one of the seven mortal sins, and decried in literature and from pulpits.

Earlier this week, a group f common investors decided to stick it to the big boys.  They drove up the price of a stock and caused a huge upheaval in the markets.  Some of the small investors got rich, and some of the hedge funds lost billions.  They exploited the greed of the hedge fund managers based on the perceived value of a single share f common stock.

Common stock is relatively easy to value.  in any company, total assets over total liabilities will give you the value of the company's total portfolio  Divide that by shares of stock outstanding, and you should have a good idea of the book value of one share of common stock.  Any deviation over the book price of a share of stock is a perception of the market that a company is worth more, or less than the book value.  The players on Wall Street play against this perceived value.  

That's an over-simplification, but you get the idea.  The stock market uses certain tactics to achieve short-tern profits.  Selling short, of selling long, or the use of derivatives is all part of the tool bag for people who want to maximize profit.  It's a betting game based on knowledge of the market, and the tools are widely available.  Since the proliferation of computers, these tools are immediately available to everyone.

The big boys got hammered this week, by a bunch of folks trading in the market, playing by the rules.  The same rules that everyone else plays by.  The big boys let their greed get the better of them, and a relatively few little guys saw what was happening, and moved to profit from it.  Now, the hedge fund managers are whining about it.  Suck it up, buttercup.  You played the game and you got hammered.  

Any regulation in the financial markets should be to protect the individual investor and provide a stable market so that everyone can benefit from free trade.  Any time you see the hedge fund guys calling for more regulation, that they are actually calling for is for the rules to be set to protect them.  And that is not what a free market is all about.