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All those institutions are interconnected. A large hit to one player can cascade to the wider market as they're forced to sell off other positions to put up add
by koolba 6y ago
All those institutions are interconnected. A large hit to one player can cascade to the wider market as they're forced to sell off other positions to put up additional capital. That could cause additional sell-offs for more leveraged players. And so on... The phrase "too big to fail" exists for a reason and it's smaller than you think.
- bluecalm 6y agoForcing big leveraged players to sell is fantastic for everyone else. There will be a lot of cheap stocks to pick up for everyone else.
- duxup 6y agoSell, what exactly? They won't buy after that?
- meetups323 6y agoIt's hard to know exactly what the repercussions were, but in my experience a lot of stocks were down yesterday, including some FAANG's and the like down 5-10%. Those numbers aren't likely to be permanent, so anyone who wanted to buy anyways got a 5-10% discount.
- boringg 6y agoAssuming that you are in cash or another asset class that isn't being sold off.
- bluecalm 6y agoNo need for that assumption. Equities going down is not a problem for reasonable investors. You just buy more for cheaper prices according to your schedule and wait. You still own the % of your companies. It's not worth less just because you can't temporarily sell it. It would be like saying that price of your house is fluctuating from 0 to 500k depending if there is a potential buyer today or not. Stock market crash is only a big problem for leveraged over commited entities, very small inconvenience for people beyond accumulation phase (as they may need to sell very small % of assets in coming months) and huge opportunity for everyone else. Stocks crashing is fantastic for a little guy. It's the same with real estate prices and it's the reason entrenched players do everything to prevent it.
- elindbe3 6y agoOr just that you have some kind of disposable income.