Just One Year

During the past 12 months, the stockmarkets dropped as follows:

S&P (USA) 45%
Nikkei (Japan) 60%
STI (Singapore) 60%

I cannot imagine the scale of this drop in just 1 year. It is unimaginable. Earlier this year, the Singapore Government was projecting good economic growth. Now, we are likely to see a serious recession.

Previously, I thought that the hedge funds should be blamed for short selling the market to make a speculative gain. Maybe, this is not the reason.

It is possible that the hedge funds are invested to the full, with borrowings of 10 times of their capital. During this crisis, the lenders pulled back their credit lines. This forced the hedge funds to sell their holdings. This could be the reason for the massive falls in the stockmarkts of 10% a day.

Lesson: All hedge funds should be regulated. They are not allowed to operate on leverage. They should only invest their capital.