Smash Notes
Why Is the Stock Market Crashing Due to the Virus
at 1:04:24
Answer
As Chamath explains, most of the stock market participates today are playing with borrowed money, and everyone is happy to do it, as long as there is little volatility in the market. However, as the market becomes unpredictable, banks pull their credit and ask the hedge funds to show more cash. As a result, funds are forced to sell some of their assets, and the cycle perpetuates.
To make it even worse, most trades today are algorithmic, done by computers, and even if humans trying to intervene with decisions based on the understanding of current situations, the computers overpower and continue their course.
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