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> if something isn't valuable in some way then you don't get paid for it They say "The market can stay irrational longer than you can stay solvent." Naturally
by repsilat 6y ago
> if something isn't valuable in some way then you don't get paid for it
They say "The market can stay irrational longer than you can stay solvent." Naturally that's a sword that cuts two ways -- many "correct" early Wirecard short-sellers lost money, but also many "incorrect" Wirecard bulls got rich on its rise. The weighing machine can take a long time to do its job, and in the meantime a lot of wealth destruction can take place.
Not that I think there's a better solution, just that the system is imperfect and is improved by many of the baseline regulatory functions of government. Government isn't all a money-pit :p
- hogFeast 6y agoRight but the baseline regulatory function actually increases costs and prices. Extractive firms love these regulations because they create rents (i.e. law). The irony is too much. And the problem with Wirecard is that people don't ask what would have happened otherwise. Wirecard had the govt suing people for them (basic regulatory function I suppose? lol). The point of markets isn't that the price is always right but that by creating a venue for people to disagree, you get an efficient outcome in the end. Fund managers who owned the stock get rinsed and will probably not get more capital. Fund manager who shorted the stock got more capital. Btw, the reason why Wirecard didn't blow up instantly was the govt. Regulators are tasked with a limited set of functions. They choose not to perform them. The failure wasn't the market, it was regulation (the fraud itself was ludicrously childish, it is the kind of thing you see in China).