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patientlywaiting.
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August 5, 2007 at 3:20 PM #70605August 5, 2007 at 5:30 PM #70542
davidt1
ParticipantQuote “The NASDAQ implosion erased $4Tn.”
I am new to all this financial stuff. I always thought that when the market goes down it is because the people who got in early sell their stocks while there are less buyers stepping in to buy the stocks. In other words, if more money moves out of the market than there is money coming in, then the market goes down. The money doesn’t disappear. It is just being transfered from the people who got in late to the people who got in early.
Am I even close in my assessment? Thanks.
August 5, 2007 at 5:30 PM #70639ParticipantQuote “The NASDAQ implosion erased $4Tn.”
I am new to all this financial stuff. I always thought that when the market goes down it is because the people who got in early sell their stocks while there are less buyers stepping in to buy the stocks. In other words, if more money moves out of the market than there is money coming in, then the market goes down. The money doesn’t disappear. It is just being transfered from the people who got in late to the people who got in early.
Am I even close in my assessment? Thanks.
August 5, 2007 at 5:30 PM #70647ParticipantQuote “The NASDAQ implosion erased $4Tn.”
I am new to all this financial stuff. I always thought that when the market goes down it is because the people who got in early sell their stocks while there are less buyers stepping in to buy the stocks. In other words, if more money moves out of the market than there is money coming in, then the market goes down. The money doesn’t disappear. It is just being transfered from the people who got in late to the people who got in early.
Am I even close in my assessment? Thanks.
August 5, 2007 at 5:50 PM #70549SD Realtor
ParticipantNot true… Money does indeed disappear…
SD Realtor
August 5, 2007 at 5:50 PM #70652ParticipantNot true… Money does indeed disappear…
SD Realtor
August 5, 2007 at 5:50 PM #70659ParticipantNot true… Money does indeed disappear…
SD Realtor
August 5, 2007 at 5:59 PM #70551JWM in SD
ParticipantYeah, it’s called credit contraction (M3). Some might argue that it didn’t really exist in the first place.
August 5, 2007 at 5:59 PM #70654ParticipantYeah, it’s called credit contraction (M3). Some might argue that it didn’t really exist in the first place.
August 5, 2007 at 5:59 PM #70662ParticipantYeah, it’s called credit contraction (M3). Some might argue that it didn’t really exist in the first place.
August 5, 2007 at 6:01 PM #70554HLS
ParticipantHi David,,
A simple answer: Money doesn’t disappear, perceived value disappears…A stock cannot be sold without somebody wanting to buy it. You cannot sell a share into thin air or into “the system”
Based on supply and demand there are always shares changing hands, so someone must buy for someone else to sell. The seller gets MONEY. The buyer gets shares of stock. So far you theory is sorta right.Imagine that there are 1 million shares outstanding that people paid various prices for. If the stock is $20 a share on Monday, it’s $20 million in “market cap” for that company, (regardless of what people paid per share).
On Friday, if ths stock drops to $5 a share, the market cap drops to $5 million…. $15 million just disappeared from perceived value.
Often times it is in the hundreds of millions or even billions that disappears. It was only worth that on paper.
Everybody couldn’t cash out at the same time, because you wouldn’t find the buyers. You couldn’t sell 10% of homes for what people think they are worth either.Home equity and stocks are paper “value” until actually sold. If your house was worth $500K 2 years ago and $400K today, did $100K of money disappear ? NO, but $100K of VALUE did. It STILL isn’t money until you sell it (AND get paid) Selling something on credit isn’t money either.
Real money is CASH, and that’s why cash is king.
Make sense ?August 5, 2007 at 6:01 PM #70657ParticipantHi David,,
A simple answer: Money doesn’t disappear, perceived value disappears…A stock cannot be sold without somebody wanting to buy it. You cannot sell a share into thin air or into “the system”
Based on supply and demand there are always shares changing hands, so someone must buy for someone else to sell. The seller gets MONEY. The buyer gets shares of stock. So far you theory is sorta right.Imagine that there are 1 million shares outstanding that people paid various prices for. If the stock is $20 a share on Monday, it’s $20 million in “market cap” for that company, (regardless of what people paid per share).
On Friday, if ths stock drops to $5 a share, the market cap drops to $5 million…. $15 million just disappeared from perceived value.
Often times it is in the hundreds of millions or even billions that disappears. It was only worth that on paper.
Everybody couldn’t cash out at the same time, because you wouldn’t find the buyers. You couldn’t sell 10% of homes for what people think they are worth either.Home equity and stocks are paper “value” until actually sold. If your house was worth $500K 2 years ago and $400K today, did $100K of money disappear ? NO, but $100K of VALUE did. It STILL isn’t money until you sell it (AND get paid) Selling something on credit isn’t money either.
Real money is CASH, and that’s why cash is king.
Make sense ?August 5, 2007 at 6:01 PM #70665ParticipantHi David,,
A simple answer: Money doesn’t disappear, perceived value disappears…A stock cannot be sold without somebody wanting to buy it. You cannot sell a share into thin air or into “the system”
Based on supply and demand there are always shares changing hands, so someone must buy for someone else to sell. The seller gets MONEY. The buyer gets shares of stock. So far you theory is sorta right.Imagine that there are 1 million shares outstanding that people paid various prices for. If the stock is $20 a share on Monday, it’s $20 million in “market cap” for that company, (regardless of what people paid per share).
On Friday, if ths stock drops to $5 a share, the market cap drops to $5 million…. $15 million just disappeared from perceived value.
Often times it is in the hundreds of millions or even billions that disappears. It was only worth that on paper.
Everybody couldn’t cash out at the same time, because you wouldn’t find the buyers. You couldn’t sell 10% of homes for what people think they are worth either.Home equity and stocks are paper “value” until actually sold. If your house was worth $500K 2 years ago and $400K today, did $100K of money disappear ? NO, but $100K of VALUE did. It STILL isn’t money until you sell it (AND get paid) Selling something on credit isn’t money either.
Real money is CASH, and that’s why cash is king.
Make sense ?August 5, 2007 at 6:07 PM #70558Allan from Fallbrook
ParticipantJWM: You’re a finance guy, right? Do you find it interesting that they no longer report M3? M1 and M2 are still there, but good ‘ol M3 isn’t. Not trying to put on my paranoid conspiracist hat or anything, but…
I’m also curious as to what you think of FASB’s role in all of this, specifically SFAS 140/QSPE accounting rules. QSPE (Qualifying Special Purpose Entities) accounting was behind the Enron nonsense and has now reared it’s ugly head again in the derivatives market. While I think that the ratings agencies bear a lot of responsibility for this mess by handing out AAA ratings willy-nilly, I also think FASB played a large part as well.
Lastly, I have been watching the monoline insurance market for the last couple of months. I am waiting for one of the big monoline players to bite the dust. If that happens (and I am not saying it will), things will get really interesting.
Just curious as to your thoughts.
August 5, 2007 at 6:07 PM #70663ParticipantJWM: You’re a finance guy, right? Do you find it interesting that they no longer report M3? M1 and M2 are still there, but good ‘ol M3 isn’t. Not trying to put on my paranoid conspiracist hat or anything, but…
I’m also curious as to what you think of FASB’s role in all of this, specifically SFAS 140/QSPE accounting rules. QSPE (Qualifying Special Purpose Entities) accounting was behind the Enron nonsense and has now reared it’s ugly head again in the derivatives market. While I think that the ratings agencies bear a lot of responsibility for this mess by handing out AAA ratings willy-nilly, I also think FASB played a large part as well.
Lastly, I have been watching the monoline insurance market for the last couple of months. I am waiting for one of the big monoline players to bite the dust. If that happens (and I am not saying it will), things will get really interesting.
Just curious as to your thoughts.
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