Quote:
Originally Posted by Choker
So many banks and hedge funds betting on Europe collapsing if it doesn't billions will be lost in the US. I'm speculating here correct me if I'm wrong.
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That's a lot like saying that people who buy homeowner's insurance are betting on having a fire so they can collect.
That's what a hedge fund is - a way to partially cover your ass if things go bad. It just reduces the risk. People who have large business investments in Europe hedge against their big risks. They still want to see Europe recover because it helps their main business. Therefore you HOPE that your hedge fund does badly.
A sime example is a trucking company. If the the price of gas go sky high, trucking companies lose money from their main business, trucking. So they hedge against that risk, "betting" on high gas prices (basically getting prepaid gas options). That way if gas prices are low, their trucking business does well. If gas prices go up, they make money selling their cheap gas. Either way they stay afloat and don't have to lay people off. They'd actually prefer to lose money on their gas hedge, because that means gas is cheap and their trucks cost less to run.
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