You must log in or register to comment.
10 daysIt never existed.
If you make two beautiful paintings, and sell one for $1000, then decide to sell the other, but nobody wants it for more than $500, you didn’t “lose” the $500 difference.
Maybe you even told people you had another $1000 painting, then only got $500 in cash for it, so your reported net wealth dropped by $500.
At worst, you actually paid $1000, then sold for $500, but even then, the difference didn’t disappear, you just transferred it to the original owner by overpaying, or to the new owner by undercharging if the price goes back up.
- 10 days
Indeed, if they’re talking about market capitalization then “wiped out” doesn’t make sense. It’s just simply a measure of the dollar cost of shares, much more important is liquidity and real volume.
- 10 days
It only makes sense in the scenario where someone paid the $1,000 price, and then could only sell it for $500 later. They just lost $500 for their efforts.
A lot of people though bought the other $500 painting, heard it was worth more but held on to it a bit longer to see what happens. Later they are told- no it’s still only worth $500. It’s only “opportunity cost” at that point.
Usually what happens is more akin to the market “correcting” the price estimation of shares of a company.
- bedwyr@piefed.caEnglish10 days
P/E ratio, price to earnings, is key to judging intrinsic wealth, although earnings can be a bit squishy of a metric. 15/1, 13/1, and thereabouts depending on sector is traditional. Tesla is trading at like 552 price to one earning. Other tech companies are also most overpriced but much of the market is also to a lesser degree.
- 10 days
The market is mostly irrational, there are no ways to judge intrinsic wealth in a late stage capitalist stock market where we don’t have free markets and protectionism through tariffs.
- bedwyr@piefed.caEnglish10 days
Idk about that, no perfect metric, but a company that earns 1 billion a year, and is likely to continue to do so, is worth about 15 billion in stock price. (edited to correct 1 to 15 from 15 to 1.)
Obviously tech especially is out of whack. The entire market is out of whack, partly because the last two big downturns had the government bailing them out to make more than if the market didn’t crash at all.
But the lack of enforcements of regulations or consequences, is another big factor, and there are others.
That said, I don’t think late stage capitalism even captures where we are right now. It’s an oligarchy, a partial fascist one, a police state. Plus the government is taking stock in companies now. Intel, now this Venezuela oil deal, (a joke, they can’t get any more oil to speak of, not even in the 25 years their contract is for, that’s why the oil majors declined, but that’s another story, other than the government gets to buy at production cost, and gets like 25 percent of the company.)
It’s oligarchic repression, sliding into authoritarianism. But my argument is admittedly just semantic and not well fleshed out perhaps.
But the stock market sounds like a zero sum game.
Who sold the stock off early? If everyone wanted to devest from a specific company and we all sold our stock at the same time and nobody wanted to buy it… huh
- 10 days
How is it a zero sum game if prices can just go up or down almost arbitrarily?
- 10 days
Someone bargaining to buy a melon at a market can negotiate a price with the seller. Then the next buyer may negotiate a better price. You could record that the price of melons has fallen. However, all of the melons and all of the currency in the transactions is accounted for. Nothing has been lost.
- 10 days
The value of a stock IS what it was previously sold for. If it sells for $100, and there are 100 shares issued, the company has a total worth of +$10,000 from stocks.
If the stock sells for 90 bucks, then the “wealth from stocks” goes down to +9,000 total since every share is now “worth” 90 dollars.
Thanks. I’m seeing two conflicting stories in my mind.
I’d the company is worth $10,000 and there are 100 shares. And if I sold 10 for $100 each the company is still worth $10,000?
But who gets to calculate when the value goes down? Is it when someone offers me $90 and I accept? Why can’t I just pretend to be two people and sell myself stock at $10 to artificially tank the price so I can buy the dip? Or do the reverse and pump the price up?
Or maybe the first 10% to sell gets the best deal and the price auto-magically goes down because of ‘market trend’ and each next 10% gets increasingly screwed until the company is worthless?
- 9 days
Stock markets like NYSE are supposed to prevent certain types of manipulation if detected. Wash trades (trading with yourself) is one of the generally illegal methods to move prices.
That second example is kinda true with stock classes and new share issuance (voting shares and non voting shares, among others). It’s absolutely possible to give different types of investors more favorable terms.
https://en.wikipedia.org/wiki/Share_class
https://en.wikipedia.org/wiki/Stock_dilution
https://en.wikipedia.org/wiki/Preferred_stockBut on open stock markets, what you have is simply the order book of bids on purchases versus bids on sales. When the two don’t meet no sales happen (no volume), when a lot of people want to buy and sell you’ll see a lot of jumps up and down as sellers go down a bit to meet buyers and buyers go up a bit to meet sellers, and this represents the volume. If sellers are more eager to sell in total then they’ll push price down as a net effect, or vice versa pushing it up for buyers competing to buy.
Current price is simply latest sale price. Total valuation is simply total shares multiplied by sale price. Yes, this isn’t accurate at all in a basic mathematical sense as it doesn’t capture nearly enough information on actual value in any sensible way.
- 10 days
Congratulations, you just figured out market manipulation! Some of that isn’t strictly legal, but since when does that affect people’s actions?
- 10 days
There don’t have to be actual sales for the price to move in an orderbook based system though, the price could collapse just from all the buy orders at the top of the range being cancelled.
You buy 10 copies of a specific collectible card for $5 each. Everybody is willing to pay $5 for each card you own, so you theoretically have $50 in the form of trading cards.
But then people want that card a lot for whatever reason. They want it so much you could sell yours for $8 each. So now, without having done anything, you have $80 in the form of trading cards.
But then people decide your cards are actually lame and don’t want to buy tgrm any more. If you were to sell them, you’d only get $1 each, so you only have $10 worth of trading cards. Thus, your cards are worth $70 less than they were, even though all the actual money is still out there and you have all the trading cards you originally bought.
To rephrase, the value of your investment fell by $70.
This is how stocks work. When the media reports that some money was wiped off the stock market, all the money still exists. It’s just that people decided some stocks are lame and not worth buying, which means the owners of those stocks can’t sell them for as much as they could have the previous day.
- 9 days
The point you’re missing is that the loss is real for the investors holding those assets.
If you bought ten cards for $5 each, you invested $50. When their market value rises to $80, you have an investment worth $80. If that value subsequently falls to $10, you’ve lost $70 in investment value. You can no longer sell those cards for what you could have sold them for yesterday.
And if you were someone who bought those ten cards at $8 each, you’ve now lost $70 of your original $80 investment. That isn’t hypothetical money. That’s money you actually spent and can no longer recover by selling your cards.
The money is not “still there”, the money transferred hands and you (or your retirement account) are holding the empty bag.
The thing is though you haven’t actually lost money or gained money until you sell the shares and until you do sell, you still have those shares so you could always get your money back if the stock goes back up. The only time you will lose money when holding stock is if the company goes out of buisiness
- 9 days
If you believe the capitalist assertion that stock always go up, sure. If you’re not close to retirement and aren’t counting on those funds anytime soon, sure.
I believe the AI circular financing bubble isn’t meaningfully going to turn a corner and become profitable enough to pay the debts already accumulated, and once it truly pops that money will never come back to the average investor trusting the financial bros to put all their eggs into that overinflated basket.
A stock is a piece of paper supposedly representing part of a company. You still have the paper.
- 9 days
There’s nothing “supposedly” about it. It does represent a part of the ownership. If you own all the pieces of paper then you own the company.
However much you paid for it and how much it’s worth are completely different stories, but the stock is indeed the ownership.
- 9 days
Functionally, to the people who shorted stocks or sold while it was still high. But more accurately, it goes nowhere; the “market value” isn’t an actual number, it’s just a shorthand for “how much all the people currently playing the stock market are willing to spend on stocks.” They count up all the shares of every stock currently issued, multiply it by the amount people are willing to pay for those shares, and that’s the market value. When it goes down, that money doesn’t “go anywhere,” because it never actually existed to begin with; it was just describing how much confidence people had in the market.
The people who short stock or who sell high are the ones who have played the game so as to benefit when that confidence drops, so they get some actual money out of the deal; but they didn’t “make” $1.8T yesterday. That’s just how much less confident investors in the American stock market are.
- 10 days
ELI5
There are 10 Charizard Pokémon cards in existence (# of outstanding stock)
Each card is worth $100 today, $1,000 total value
Tomorrow the price falls to $90, $900 total value
$100 was “wiped”
If the charizard card is worth $80, $90, $100, or $110 will continue to play out.
If it did the opposite and price of each card went to $110 then you could say $100 was “injected” into the market.
- 9 days
Also, if you do that kind of stuff with Charizard and people find out, it’s gonna be hard to get a job anywhere but the FBI.
- 9 days
It’s not real. It’s just gambling for rich people. Occasionally they use it to steal from our retirement.
- dihutenosa@piefed.socialEnglish10 days
Stock valuation has always seemed like play/imaginay money to me. Until I sell my stock and buy that large purchase, I treat mine like just a number.
Imagine you’re the richest person on the planet, and own 1 trillion monies in stock of Omnia Corporation. Can you buy 1 trillion ice cream cones for 1 money each? No, because you can’t sell 1T stocks without utterly devastating the stock price… But you sure can take a loan backed by this imaginary money. Boggles my mind.
I wish someone with economics background would correct my thinking.
- 10 days
I don’t have economics background and think the same way as you do.
They just create money out of thin air.
Same with money. If the power goes out the can of tuna in the cupboard suddenly is worth more dead president paper. Maybe it was worth a dollar yesterday. But 2 weeks into no power I won’t sell it to you for 5 dollars.
- kkj@lemmy.dbzer0.comEnglish10 days
The tuna in the refrigerator, on the other hand, is suddenly worth less. Where’s the consistency?
You’re not wrong, except the part where the money becomes more real once you sell the stock. All assets are like this – if you lasso an asteroid that contains $45 umptillion of gold, you won’t be able to sell it for $45 umptillion because you’ll crash the gold market. Money has the same problem – when the money supply grows, everyone has less money per money, which we call inflation.
I have a bachelors in economics and your pretty close except you’ve got realize that all money is like this. If you’ve got a us greenback in your pocket and if I decide it worthless to me, and you want something from me then all you’ve got is a small piece of art.
All value is just agreements between people and money is just a method of keeping track of favours owed that we worked out thousands of years ago. In the example of a stock, all a stock is, is an agreement between the company that issues it and its holder, that the company will do you a favour (give you some money, a dividend) some time in the future, and keep doing it every time they have some extra favours to hand out.
I may decide that the promise of those future favours are worth doing a lot of favours right now or only a few.
Right now everyone who buys and sells stocks doesn’t think a lot of companies aren’t going to be able to a lot of favours in the future so the value in the stock market has gone down. But that doesn’t mean a trillion dollars has disappeared it just means that the offer of money is lower- 9 days
My simplified take is all money is commoditized promises. It works if people believe they will work. Doesn’t if they don’t.
- bedwyr@piefed.caEnglish10 days
You don’t need a business degree to know you are correct here. Someone whom may or may not be I has one though, and you are correct.
- 10 days
To be fair the very idea of value of money is “imaginary”. Even a bank note is nothing more than a promise.
The value of a stock is derived from the trust that someone will trade you for it. If the trust goes away, so does the value.
Similarly, the value of a bank note is derived from the trust that someone will trade you for it. If the trust in a bank (bank run) or government (scarce money supply, solvency) or economy goes away, so too will the value of money, i.e. inflation.
Even comodities and tangible goods have “imaginary” value, because these things can be under or over produced, which in turn changes how likely someone might want your good.
That being said, the degree of imagination needed to trust the value of trade varies, and stocks are definitely close to the top of the imagination tree.
- dihutenosa@piefed.socialEnglish10 days
The difference with stock being that if you have 1T monies, you can buy stuff worth 1T (after ice cream cones run out, buy a factory or switch to candy). With 1T of stock, you can’t.
- Semjeza@fedinsfw.appEnglish9 days
No, but you can take a 2T loan using the 1T stock as collateral, and buy more things with the promise you buy it back.
And you can even use the 2T loan to buy out competitors or otherwise invest in that 1T of stocks. And when it’s worth 2T borrow 5T to pay off the loan and have 3T to invest.
- 9 days
It didn’t go anywhere, because it was never real. Market cap is not the same as cash. The fact that Apple stock multiplied by its price is trillion, doesn’t mean you can sell trillion worth of apple stock and get trillion dollars in exchange. At that point price starts to respond to your transaction
because it was never real. Market cap is not the same as cash
btw cash is no more real than company shares. both are paper and numbers in a database.
- 9 days
Money isn’t real. It’s something imaginary we agree on.
I told my child this (about 7 yo at the time, too young probably). He said “how is it imaginary if it’s green paper?”
Honestly that’s the best follow up.
It is green paper. It’s just that it’s only something other than that if we agree on it’s value.
Furthermore, you can have fewer pieces of money, but if you have bigger numbers on the pieces, you have more.
I’m in bottle cap futures.
Money is just a more practical way to trade. If we stick with the good old barter system, we’d still be trading one cow for two tables.
Mostly everyone is unhappy, but it is not the small green pieces of paper that are the problem. We’re watching symptoms of fascism, would be great to see a good old fashioned motorcade by a book warehouse
