Hedge Fund Slum Lords

From Michael Hudson:

[But] you could say that the whole stock market is a kind of a ponzi scheme, because $4.3 trillion has been provided to the banks by the Federal Reserve in quantitative easing to keep the interest rates down. So if you’re a good bank customer, you can borrow from the bank at 2 percent, you can borrow to take over a company or to buy stocks or to buy risky bonds that are yielding more, and you can make an arbitrage. That is, you can make in dividends or interest more than you have to pay.

Since Fed QE ended in 2015, the Bank of Japan and the Euro Central Bank have purchased their own bonds in 2016, effectively propping up the Ponzi.

A large portion of the millions of homes that were foreclosed have been bought by hedge funds, often for all cash – because they can make more money renting them out than they can make in the financial markets.

Retail markets are ruined because institutional investors must resort to gathering in dark pools to hide their trades from high frequency traders, effectively ending price discovery.  The proliferation of HFT has also ruined arbitrage profit opportunities for the hedge funds, resulting in a stock market bubble where correlation between stocks is destroyed.  It’s a rocket trip to Hell, waiting for a black swan.  We’d heard a couple of years ago that HFT had wrung all the trading opportunities out of the market.  Becoming slum lords is proof of that reality.

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