Every year, the Dow Jones Industrial Average (DJIA) examines its corporate list to determine if companies should be added or removed. Is the Fortress Investment Group ready for prime time? Should the Fortress Investment Group be added to the Dow Jones 30?
2008 Credit Crunch
Experts might differ as to which were the top financial institutions in 2000, but you might have seen the following names: AIG, Bank of America, Bear Stearns, Citigroup, Goldman Sachs, JP Morgan, Lehman Brothers, Morgan Stanley and Wells Fargo. Each of these firms might have dominated certain market sectors, like credit cards, insurance or mortgages. But, all that changed in 2008.Wall Street has always been very competitive, eventually old risk management strategies fail and the “house of cards” comes tumbling down. One common problem with failing companies is their habit of “doubling down.” When they start to rack up paper losses, they try to compensate by “chasing returns.” Of course, this is the worst thing they could do.Failing businesses increase their risk at the worst possible time. When their liquidity is already in jeopardy, they think they can find new capital sources. If the banks cut off their credit line, they are “insolvent.”
“Game over, man.”
In 2008, the sub-prime mortgages and mortgage backed securities (MBS) were the death knell of AIG, Bear Stearns and Lehman Brothers. Each titan fell due to bad risk management.The Federal Reserve (Fed) stepped in when the capital markets seized up in 2008. The Fed purchased the bad banks, wrote off the toxic assets and merged the healthy assets with the surviving firms, like JP Morgan, Goldman Sachs and Black Rock.
In 2018, the Dow Jones includes the following financial stocks: American Express, Goldman Sachs, JP Morgan Chase and Travelers. The good news is that the financial services are always needed. This allows for companies, like the Fortress Investment Group hedge fund to rise.
New Financial Landscape
“Like a thief in the night,” the wealth disappeared in 2008 and most assume the toxic assets are gone. But, now the Dow is falling again in 2018. Could the 2008 Credit Crunch re-emerge in 2018?The Fortress Investment Group was the first hedge fund to go public. They helped fund the Winter Olympics. They have since been purchased by SoftBank for its Vision 2.0 Strategy.Fortress has been instrumental in recycling assets and spinning them off into new IPOs. This has been essential to keeping America operating. Failing companies could lead to layoffs, which would be detrimental to many communities.Black Rock Financial is another name that could be added to the most influential financial businesses list. It is noteworthy that two of the co-founders of the Fortress Investment Group had worked at Black Rock. How many shares did Black Rock purchase during the Fortress IPOs?The Fortress Investment Group has made a significant impact. They have kept the American economy going. The Fortress Investment Group and Black Rock might be added to the Dow Jones, one day.