What Is Stock Market

If people never learn from the past, the 2008-2009 recession is the least they have to learn for financial investing. Remember markets always go down but to what extend we never know. In 2008 it was so catastrophic that many companies went bankrupt as well as individuals.

What an investor should learn from this is to be always careful and diversify and avoid margins (if they can). What happened in 2008 was that many hedge funds were forced to sell their stocks on margin (they had a margin call) since the value dropped so much. And when they did sold or unload their stock shares, each of stocks kept going down (remember, the hedge funds are a large share holder, and when everyone wants to sell, the value plunges).

The stocks were going down everyday for a few months and some were going down 10% a day! An example of a beaten up stock is Teck Resources. If you look at Teck Resources Limited the stocks went almost to ~$3 from highs of ~$50 in a short period time. What happened was that Teck Resources had a major debt that was up for renewal and everyone thought that they can’t renew and since the debt was around $11B (half of company capitalization) , it would have had to file for bankrupcy. But then the stock recovered by miracle and they were able to sell some assets and renew the loan. It is a very good stock, but we can see that in a recession everything will go down if not go bankrupt.