Within 10 minutes of watching "The Meltdown" I realized how vulnearble the financial markets are. Especially, financial institutions that go all out and invest heavily. However, what caught my eyes is that a rumor can effectively bring down a robust firm in its prime, because when one investor pull out due to suspicious and groundless rumors, all of them pull out, despite the truth.
The Financial market runs on supply and demand. If a stock is in demand then the firm selling those shares have an increasing share value, but if more people want to sell shares rather than buy, we experience a seller surplus and declining share values. While watching this video, I realized that determning the survivability of a firm with the external, depends on the investors attitudes and expectation.
The financial market is a support system for investment firms. If one supporting leg crumbles, the burden of the rest of the legs will increase, and they will wantt o dispose of their load, in this case invest a lot less or retract their offers and money. What caught my attention is that Bears probably had no financial diversity, the eason why they completely collapsed was because they invested so heavily in the mortage business, that forgot to play it safe.
No comments:
Post a Comment