I ve started learning about the market but I dont know what hedge funds are. Please explain
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Attempting a *true* ELI5 here:
Most people on the stock market buy company-bits as low as they can, and then hope to sell them higher, so they’re hoping the cost goes up all the time.
Hedge funds have found a way to make money even when prices go down: Instead of buying stock, they borrow it.
Let’s say they look at Robinhood, and say, “people *hate* that guy, that’s going to hurt his stock price!” Then a guy says, “no, they’re too big and easy to use, I bet they’ll be fine.”
They say, “I’ll take that bet. I’ll borrow your stock shares from you, and I’ll pay you rent on them until I return them in a week or a month.” The other guy is happy, because he ‘keeps’ his stock and still gets paid.
The Hedge fund gets to *sell* the shares he just borrowed at the current price, and if all goes well, he can buy them back at half that in a week or a month, and just *keep* the rest of the money he got from selling the shares(minus the “rent”).
This can get even crazier with all sorts of dastardly tricks that can be used to sell the same borrowed shares over and over without even buying them again, through the magic of *intentionally bad bookkeeping*, but that’s a whole other ~~strategy~~ *tragedy.*
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