Comment on $1.8 trillion was wiped out from the US stock market yesterday, where did it go?
CombatWombat@feddit.online 14 hours agoThis is generally good analysis, but I think you overestimate how different legally a claim on the ongoing usage of a piece of real estate is to an ongoing share of corporate ownership and by extension profits, and underestimating how much speculation distorts real estate markets relative to the stock market.
ilinamorato@lemmy.world 1 hour ago
Yeah, all ownership and money is made up, and the value of everything is more-or-less arbitrary. But for the sake of this question, the value of one is more real than the other.
For one thing, the transactions representing “market value” are not all going to happen today. The combined value of every company’s shares on US exchanges is something like $75T, and on a really really good day maybe like $1T is going to actually change hands. If all of it ever did, the market value would probably fluctuate, but it would stay about the same because all of those shares are still out there and they all have a selling price.
But for your house, well, you may well actually sell it today. If you do, you will actually (yes, insert all the asterisks here) get all of that money out of your asset, and after that the asset is worth nothing to you because you don’t own it anymore. Its value is real and attainable.
That value fluctuates with speculation, sure; but if the economy were to collapse, having a house to live in is still of use. A piece of paper saying you own a hundred-millionth of a corporation which no longer exists isn’t, save as tinder. That gives real estate some floor of value that a stock could never have; it’s very unlikely that they would ever stop tracking the fact that you own a home just because the value went to zero, but they regularly delist companies from the NYSE and NASDAQ.
And the other thing is, I’ve done a pretty poor job of pointing out that we’re talking about two different types of valuations here: one is the valuation of an entire market, while the other is the valuation of a specific asset owned by an individual. When talking about the $75T valuation of the stock market (and its $1.8T loss), we’re talking about the former; its analogy in real estate isn’t a single house, it’s the housing market as a whole. But when talking about a single mortgage, the analogy is to a single stock share.
When the market lost $1.8T in value, the only individuals who lost any money were the ones who had the misfortune to sell when the price was lower than they paid for it; but their losses didn’t contribute to that valuation loss (other than indirectly), they were an effect of it. It’s entirely possible for an individual to lose money in a bull market or make money in a bear market.
On the other hand, if your individual home loses value, it has…well, um, lost value. If you sell it when its value is lower than what you paid for it, regardless of how great the market as a whole is, there’s no way for you to make money in that transaction (yes, asterisk, I’m sure there are ways in which that might still be a financially beneficial choice, yada yada). Its value directly means something to you in a way that the market value doesn’t.
Anyway, I’ve used a lot of words but not been super clear, so I guess I should stop for now.
CombatWombat@feddit.online 1 hour ago
They’re good words, and I think helpful for readers. I’m glad you wrote them.
ilinamorato@lemmy.world 21 minutes ago
You’re very kind, thank you.