I’ve been trying to follow the Wall Street bets situations, but I can’t find a simple definition of hedge funds. Help?
In: Economics
**There is no such thing as a “hedge fund”**
These firms should be called by their proper name: **Speculative Funds**. They make high risk (and often highly leveraged) gambles in the securities markets, using hedging tools and techniques that were originally meant to mitigate risks (such as shorts, options, futures, and other derivative securities).
They are much less regulated than traditional investment banks (JP Morgan, etc) and as such operate under the radar. They also appeal to high net worth individuals.
A famous Speculative Fund, Long Term Capital Management, nearly caused a systemic collapse years ago. It was run by some of the most brilliant Financiers and Economists to ever live, which stands to this day as a testament that even the geniuses cannot predict everything.
And that is what we are seeing with GME these days. A large number of Speculators gambled with very wealthy people’s money and underestimated the number of people who also knew how to play their games. And more importantly play those games against THEM.
And they are pissed, because peasants are not supposed to beat them at their own games.
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