Who is doing panic selling?
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It seems to me the panic selling in the stock market never ends. I can think of the following sources of sellers:
1) Hedge fund. Yesterday Congress has an testimony on Hedge Fund, and five famous Hedge Fund managers were there. Hedge fund industry has grown rapidly in last 10 years. Besides wealthy clients, they manage money for pension funds and university endowment funds, which in hindsight are not suitable investors for hedge funds. A recent example is T. Boone Pickens lost his $165 million endowment to his alma mater University of Oklahoma. How big is hedge fund? One source I heard is the hedge fund industry manages $1.3 trillion in the US.
George Soros (from left), James Simons, John Alfred Paulson, Philip Falcone and Kenneth Griffin are sworn in during a hearing on the hedge fund industry in Washington, DC on Thursday. Photograph: Tim Sloan/AFP/Getty Images
2) Mutual fund. This one is much bigger. The problem is in the US as baby boomers approach retirement, amid this market crash, they have every intention to bail out (sell their shares), and put their money under mattress. I have heard whole a lot more talkings on market and stocks in local Panera Bread store, compared to the past.
3) Retail investors. Similar things are happening here. If people invested the money for their child’s college fund, and saw that shred in half with their child about to attend college, they have every intention to sell, and put money under mattress.
Risk tolerance for different people
My father and my father-in-law, both in their 60s and live in China, would never touch stocks.
My wife, has more risk tolerance, but she will only tolerate the upside of the stock market, not the downside. I think many people think like her (although they don’t like to admit).
Me? After 5 years in the US stock market, I think I am more realistic. I can take both the upside and downside of a stock or the market. One nice thing is I will continue to work for many years before I retire. In other words, the short term up and downs do not mean much to me as they meant to many baby boomers 🙂
Any buyers left?
1) Buffett: unfortunately he ran out of money now, after he did the deal with GE and GS.
) Very few retail investors who have the money.