Many Canadians, who invested in the Canadian stock market, may be very nervous now. The TSX (Toronto Stock Exchange) composite index has dropped almost 20% in the last 2 weeks. This is probably the biggest decline I have ever seen since I came to Canada.
Interestingly, many rich people are still getting richer. Why? Many rich people give their money to hedge fund managers to invest. Most hedge fund managers are able to make money in the bull or bear market. They can go short if the market is very bearish like today. Short means selling equities that they don’t own and buying back later when the values have decreased.
When the market is like today, most (if not all) hedge fund managers are taking short position. They probably make more money than taking long position. Why? When the market is down, people are fear of losing money. That’s why many investors are likely to sell their positions too, which makes the decline is even sharper. At the end of the day, the rich people are even getting richer.
I am impressed with the new advertisement from Microsoft starring Bill Gates and Jerry Seinfeld. It’s really brilliant. I think it is really worth $300 million. Good job!
