But the stock market sound 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
Comment on $1.8 trillion was wiped out from the US stock market yesterday, where did it go?
radix@lemmy.world 1 day ago
It 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.
kender242@lemmy.world 1 day ago
SpaceNoodle@lemmy.world 1 day ago
How is it a zero sum game if prices can just go up or down almost arbitrarily?
anton@lemmy.blahaj.zone 12 hours ago
Because the main way money moves in and out is by people buying in and cashing out. If no company injected more (by dividends and stock buy backs) and no company took money out (by IPOs, funding rounds or stock options), it would just be a box people would put money in and get money out.
ln that case it would be a zero sum game, because every dollar taken out by someone was put in by someone else, but because there is a flimsy connection to companies creating/extracting value in the real world it is not.workerONE@lemmy.world 1 day ago
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.
SpaceNoodle@lemmy.world 1 day ago
Sure, but there’s nothing material actually backing the stocks.
jaykrown@lemmy.world 1 day ago
Indeed, if they’re talking about market capitalization then “wiped out” doesn’t make sense. It’s just simply a measure of the value of shares, much more important is liquidity and real volume.
credo@lemmy.world 1 day ago
It only makes sense, in the scenario where subversive paid the $1,000 price, and then could only sell it for $500 later.
A lot of people though bought the $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.
bedwyr@piefed.ca 1 day ago
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.
jaykrown@lemmy.world 1 day ago
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.ca 1 day ago
Idk about that, no perfect metric, but a company that earns 15 billion a year, and is likely to continue to do so, is worth about a billion in stock price.
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.
hoshikarakitaridia@lemmy.world 1 day ago
Usually what happens is more akin to the market “correcting” the price estimation of shares of a company.