REBEL YELL: Can David Win Against Goliath? – The Storm On Wall Street | RIELPOLITIK

https://rielpolitik.com/2021/02/27/das-kapital-can-david-win-against-goliath-the-storm-on-wall-street/

After the storming of the Capitol, there is now a big commotion on Wall Street. This time it is not the supporters of the Occupy Wall Street movement who are trying to storm the fortress of the financial world. It is small investors who are hurling a stone at the big funds.

Hedge funds – that’s what we’re talking about – are actively managed funds whose goal is to achieve the highest possible return regardless of market developments. This is achieved by hedging (hence their name) their shares, bonds, their investments in commodities, foreign exchange and other assets. Most of the time, funds hedge by buying what are called shorts on their investments. It works like this: they buy, for example, shares of a company within a longer period for a total of 1 billion dollars, usually when they are undervalued, which raises the price of those shares, which in turn attracts small investors. At this point the funds get rid of their shares and take a short position by borrowing the shares from an institutional investor like a pension fund and selling them on the market pushing the price down. To return the shares to the pension fund, they repurchase them at a lower price…

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