All about bulls and bears and how Stockmaxim can make your investments fly high

All about bulls and bears and how Stockmaxim can make your investments fly high

All about bulls and bears and how Stockmaxim can make your investments fly high

Statistics show that most successful traders are typical “bulls”, that is, they prefer to play for promotion. This is particularly true of the stock market. Therefore, both managers of the largest hedge funds and ordinary players are in constant search of undervalued shares, the acquisition of which can bring them huge profits.

But you can earn not only on the growing but also on the falling, “bearish” market. This is very colorful tells the famous film “The Game on the slide” (The Big Short). Colorful, ┬ábut not always clear to a mass audience.

The script of the film is based on the book of American writer and financial journalist Michael Lewis, who stated that it is not enough to explain to the audience complex concepts, it is necessary that a person wants to understand them. Speech, in this case, is about the macroeconomic reasons for the crisis of mortgage debt securities in the US. And despite the fact that Forbes columnist Steve Danning highly appreciated the reliability of the film, he (as well as in the book) does not mention the one who in reality has earned on this crisis the most – billionaire John Paulson (John Paulson).

In addition to Paulson, you can name a number of famous “bears”, but, first of all, let’s recall where this concept came from – “bears”.

The first explanation that we find most often is that, unlike the bull that raises the enemy on the horns, the bear beats his paw from the top down. However, it is possible that the origin of the term is somewhat different. For example, the exchange historian E. Morgan believes that the beginning of everything was laid in the XVII century, when the first coffee exchanges were born in London coffee houses. Already then, some dealers sold shares, which they did not have in sight. That’s about them, and they began to say that they are selling the skin of an unfortunate bear. (Today it is correctly called futures and options).

So, how do you make money selling skins that you do not have?

“In theory, everything looks simple enough,” explains John Goodman, an analyst with brokerage company Stockmaxim. – Suppose you think that bearish fur coats will soon be out of fashion. Therefore, you are turning to a friend and asking him to loan such a coat, promising to return it, say, in six months. Having received this piece of clothing, you immediately, while it is still in demand, you sell it on the market and earn $ 1,000 from selling it.

Let’s fix this moment: you already do not have a fur coat, but there is $ 1000 and the obligation to return a fur coat to a friend in 6 months.

In the next six months, animal rights defenders are winning a convincing victory, and wearing fur from fur is not only unfashionable but also indecent. At this point, you again go to the market, buy a new fur coat at a $ 150 bargain price and, with words of deep gratitude, return it to your acquaintance. Everything, the transaction is closed, and your net profit from it was $ 850. “

“It is according to this scheme – continues John Gordon -” Bears “and conduct their operations in modern financial markets. Only instead of skins, they lend shares and money from banks or funds, and instead of words of gratitude return to the creditor interest on the amount of the transaction. “

Probably the most famous “bearish” operation in the Forex market was the collapse of the British pound by George Soros in 1992 when he and his Quantum Fund at the expense of borrowed funds almost instantly threw a huge amount of British pounds equivalent to 15 billion dollars into the market.

The catalyst for this operation was then the quote of the head of the German Bundesbank Helmut Schlesinger, paraphrased by the Wall Street Journal and the German newspaper. Their publications said that even after the reduction of German interest rates, one or two European currencies may be under pressure.

And that’s all! Say no more! But Soros and the entire financial world suggested that one of these currencies might be the British pound, which was by then greatly overvalued. Soros immediately began to sell their (or rather borrowed) pounds sterling. After him, other financiers rushed to do it, and the Bank of England, trying to keep its exchange rate, was forced to buy up this huge money supply.

To keep the course failed, the British surrendered, and because of one harmless – and yes even paraphrased by journalists! – Quotations (although not without the help of Soros), the pound fell 15% against the German mark and 25% – against the US dollar. As a result, $ 15,000,000,000 of the Quantum fund turned first into $ 19,000,000,000, and in a few months, the figure increased to $ 22 billion!

This operation of Soros fully confirmed the popular saying among financiers that “money is needed to raise prices. The same prices may fall under their own weight. “

By the way, the government led by Prime Minister John Major was far from the only one who suffered in the UK from the attack of the “Bears”. An interesting case is that when, as far back as 1720, the British Parliament initiated the game of decline, which adopted the Royal Exchange Act, which caused a sharp drop in the share price of many companies. As a result, not only ordinary shareholders lost their funds, but also many businessmen, politicians and even members of the royal family. And all the famous scientist Isaac Newton lost a fortune – 20 000 pounds sterling (which today is approximately 2.5 million), then sadly said: “I can calculate the movement of the stars, but not the madness of people!”.

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