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 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
$1.8 trillion was wiped out from the US stock market yesterday, where did it go?
Submitted 1 day ago by cat_fishing@feddit.online to [deleted]
Comments
BlackLaZoR@lemmy.world 5 hours ago
Tudsamfa@lemmy.world 5 hours ago
You’re like a top poster of c/stocks, shouldn’t you of all people know?
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.
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.
hoshikarakitaridia@lemmy.world 1 day ago
Usually what happens is more akin to the market “correcting” the price estimation of shares of a company.
kender242@lemmy.world 1 day ago
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
SpaceNoodle@lemmy.world 1 day ago
How is it a zero sum game if prices can just go up or down almost arbitrarily?
melsaskca@lemmy.ca 10 hours ago
It’s on paper. It never existed to begin with. Just like saying the rock in a ditch I found is worth 200 million dollars. Then, when I couldn’t sell it, I revalued it at only 100 million dollars. So, the extra 100 million didn’t go anywhere. “Value” is a truly subjective thing which is encompassed by the old phrase “One man’s trash is another man’s treasure”.
technocrit@lemmy.dbzer0.com 7 hours ago
Damn you got a $100m rock? I’ll give you $20 for it.
Infrapink@thebrainbin.org 14 hours ago
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.
3abas@lemmy.world 13 hours ago
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.
wetsoggybread@lemmy.world 11 hours ago
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
bstix@feddit.dk 12 hours ago
A stock is a part of a company. You still have have that part.
foodandart@lemmy.zip 7 hours ago
It only ends up being really “there” if the stake- and stockholders withdraw their shares and cash out. It’s all paper valuations.
Many billionaires are actually what is known as paper tigers in that their wealth assets aren’t real, (as in real estate) because the “wealth” is based on numbers on balance sheets and little else.
boonhet@sopuli.xyz 6 hours ago
Yes, it’s something a lot of people don’t seem to understand. The “value” of a company is it’s stock price multiplied by all the shares and the stock price is pretty much just the last price someone was willing to buy a share at.
If everyone goes and sells all of their Tesla and SpaceX stock and nobody ever buys any again, Elon Musk might not even be a billionaire anymore.
Windex007@lemmy.world 6 hours ago
Nobody even HAS to sell their shares, the second part is what does all the lifting here: “and nobody ever buys the shares again”.
If overnight, everyone just said “I have no interest in buying at any price” that’s the end of it. The shares are now worthless.
Every seller needs a buyer. If “everyone sold their shares”, all that happened is the share owners changed.
foodandart@lemmy.zip 6 hours ago
God, wouldn’t that be a dream!
Treczoks@lemmy.world 1 day ago
It was never there. It was just dreams and imagination.
tempest@lemmy.ca 1 day ago
“future profits” or something
Treczoks@lemmy.world 23 hours ago
More like “imaginary profits”…
SpaceNoodle@lemmy.world 1 day ago
Same place it came from.
deleted@lemmy.world 1 day ago
Thin air.
cRazi_man@europe.pub 1 day ago
Up the asses of rich people?
Aeao@lemmy.world 16 hours ago
I have it
ComradeMiao@lemmy.world 15 hours ago
Could I have tree fiddy for an impossible burger, please?
Aeao@lemmy.world 13 hours ago
I’ll think about it.
Sludgeyy@lemmy.world 1 day ago
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 happened and price of each card went to $110 then you could say $100 was “injected” into the market.
skeezix@lemmy.world 1 day ago
that’s a lot of words for blowin smoke up your ass
Natanael@infosec.pub 19 hours ago
You shouldn’t let a Charizard do that it’s not safe
sik0fewl@piefed.ca 21 hours ago
Monopoly money is real and exists. That $1.8 trillion never did.
Aceticon@lemmy.dbzer0.com 12 hours ago
There are two massive mathematical assumptions to determine the “value” of the stock market:
- The price of a stock of a company times the number of stocks of that company is the value of that company
- The price of all stocks of a company is equal to the price for which a stock of the company was last traded (so, a simple linear extrapolation)
It seems clear to me that one or both of those are in fact wrong and do not represent reality.
Mercer@lemmy.zip 10 hours ago
I mean it is an approximation, repeatedly it has been shown that if another company wants to buy a publicly listed company they usually have to pay a premium to the market value = current stock price * number of shares so if anything that can be off by a bit more or less but is generally accurate, the main exemption to this being when a company has a very low float i.e SpaceX which only has 5% of its equity publicly tradable. Your second point is not typically what industry uses, usually we would use a optimized calculation between the current active highest bid and lowest offer. Your third point is abitrary, all things in our society are “valued” in an economic sense, by currency units of your choosing. There is often a discrepancy between public good and company value, but that is how people work. Gold was more valuable than food for peasants during feudal times or in USSR so it isn’t just Capitalism that makes this happen
Aceticon@lemmy.dbzer0.com 10 hours ago
My point is that it’s a horrible approximation, especially for things like “growth” stocks and during market bubbles.
Further, companies buying other companies don’t purchase them for the “value” of that company, they purchase them for the amount of money that those who own that company want to part with their share of the company. This is all over the place and even for the same person value widely at different points in time - people can and do (it’s just good business sense) demand as much money for their stocks as they can get away with meaning that the amount paid is not necessarily the amount the company is worth.
As for your response to my 3rd point, I don’t think I’ve explained it correctly - my point is that the “value” of a company is often in things which aren’t easily quantified in money (or gold, or whatever currency token), something especially bad in “growth” “tech” stocks because there’s a double problem that to find a monetary expression of the value of the company you need to find a money value of “intellectual property” (which Tech companies are generally heavy on, much more so than capital assets which are far easier to value) which is notoriously hard and all over the place and, worse, find a money value for future market prospects and profitability (because they’re “growth” stocks, so their value is not on today’s market share and revenues for their products and services) which is even more full of la-la-land wishful thinking pulled-out-of-somebody’s ass valuations than intellectual property.
So my 3rd point isn’t about that it’s somehow wrong to translate the value of a company into monetary units, it’s that said conversion is another source of error with an error amount which can vary a lot between companies and be massive in some cases.
resipsaloquitur@lemmy.cafe 7 hours ago
North Korea.
dihutenosa@piefed.social 1 day ago
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.
deleted@lemmy.world 1 day ago
I don’t have economics background and think the same way as you do.
They just create money out of thin air.
LifeInMultipleChoice@lemmy.world 1 day ago
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.
CombatWombat@feddit.online 1 day ago
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.
bedwyr@piefed.ca 1 day ago
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.
SkyNTP@lemmy.ml 1 day ago
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.
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.
svtdragon@lemmy.world 6 hours ago
A good currency serves two purposes: a good medium of exchange (easy to transact, easy to find someone willing to accept it in exchange for goods and services) and a stable store of value (worth ~the same yesterday as today). They are distinct purposes.
You’re describing the former (finding someone to trade with) but actually talking about the latter in your point about “imaginary value” of money (as distinct from stocks). So I’d offer a small addendum about the value of money being imaginary: the guarantor of a currency plays a huge role in making the value real, in the sense that they are obligated to accept it when you use it to pay taxes.
Likewise commodities like gold are a somewhat stable store of value (disregarding supply shocks for the moment) in the sense that if everything goes to shit you can use them to make shiny baubles (or semiconductors).
Notably this is not the case for stocks, which is why stocks aren’t a good currency.
dihutenosa@piefed.social 1 day ago
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.
Flax_vert@feddit.uk 9 hours ago
burp
ilinamorato@lemmy.world 22 hours ago
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.
IAmNorRealTakeYourMeds@lemmy.world 1 day ago
Imaginary money when people who imagined it find out is imaginary:
Semi_Hemi_Demigod@lemmy.world 1 day ago
All money is imaginary
IAmNorRealTakeYourMeds@lemmy.world 1 day ago
but some imaginary money is more imaginary than others
subverted_per@lemmy.blahaj.zone 1 day ago
Some people were getting bank loans based on that imaginary money.
Jtee@lemmy.world 23 hours ago
Not all money, but it’s value is.
PetDinosaurs@lemmy.world 20 hours ago
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.
themaninblack@lemmy.world 19 hours ago
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.
FordBeeblebrox@lemmy.world 15 hours ago
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
TankovayaDiviziya@lemmy.world 19 hours ago
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.
Polisheocket@lemmy.zip 17 hours ago
It’s unrealized money that disppeared
altphoto@lemmy.today 17 hours ago
Nope, not behind my couch!
gdog05@lemmy.world 1 day ago
Wall Street has what we call a bussy. They stuff and store these losses in there.
Bustedknuckles@lemmy.world 1 day ago
Simplistic answer is that equity holders sold and turned some of their equity into cash.
Slightly more nuanced answer is that when people tried to sell, they couldn’t get as much as they wanted (paper value of the equity) so accepted a lower price.
Eli5: I have two gumballs that I paid $10 each for. They’re “worth” $20 combined. I go to sell one but no one will give me $10, i have to accept $6 instead. Now that’s the “worth” of each gumball. Two gumballs now are $12. Price discovery means that all gumballs lost 40% of value™
Nemo@midwest.social 10 hours ago
Valuation owes more to perception than utility. If the perception of worth shrinks, the price deflates accordingly.
So it is not actual value of anything that disappeared, but rather that prices fell.
CombatWombat@feddit.online 1 day ago
I think one of the most common misconceptions about the money supply is that there are a fixed amount of dollars at any time, so if there were $6 trillion yesterday, you can expect there to be $6 trillion today. But this isn’t true; the US money supply is specifically designed so that money comes into existence and vanishes out of existence all the time during the day. When you take out a mortgage, the money you get loaned didn’t exist before it was loaned to you, in the same way the $1.8 trillion that was lost in the stock market yesterday simply no longer exists.
ilinamorato@lemmy.world 22 hours ago
The mortgage example is a little bit different. True, that money “didn’t exist” before you signed the loan (loans do increase the money supply), but it’s still “real money” inasmuch as it’s secured by the asset that is your home, and backed by the other assets that the bank holds (i.e. other people’s secured mortgages), and pays out real, actual, spendable cash, since the builders still need money to buy two-by-fours, for instance. The person who pays the mortgage probably never actually touches any of that money, but it still has at least some basis in reality. Fractional reserve banking feels kind of stupid, but it’s been around for long enough to be a plot point in It’s A Wonderful Life, more or less with no major issues.
With the stock market (and pretty much all speculative markets), it’s different. That money exists even less than it exists for a mortgage transaction; speculative markets don’t increase the money supply the same way that bank loans do, because the money isn’t based on anything in the real world at all.
To illustrate: a stock can lose value without anything changing hands at all. If you buy a stock for a hundred real dollars on Monday and that company does something stupid on Tuesday, your share could lose half of its value even though nothing changed hands that day. If you sold that stock on Wednesday, you might get only $50 of real money back. “Where did the money go?” Nowhere. I mean, functionally, the person (or bank or whatever) from whom you bought the stock on Monday still has the other $50, but they didn’t steal it; it’s just that now, there’s nobody who wants to spend $100 to buy it from you anymore. That money isn’t secured by anything or backed by any objective source of value. It’s entirely subject to whims and vibes, which economists call “market forces” to feel better about themselves.
When people talk about “market value,” it’s those whims and vibes they’re talking about: how much people are willing to pay for shares. There are
X-million shares out there which people are willing to buy for $Yeach; multiply those two numbers and you get the total market value. So when a market “loses value,” it doesn’t mean that any actual money has gone anywhere, it means that nobody wants to spend that much to buy into the market anymore;Yhas just gotten smaller. If every bank account in the world was suddenly frozen and no money could move anywhere, the market could (and almost certainly would) still lose value.Now, in all likelihood a good chunk of money has actually gone somewhere in addition; the people who shorted the stock and who sold early while it was still worth a lot are the ones who have it now. But that’s not where it was lost, because that’s not what “market value” actually measures.
CombatWombat@feddit.online 13 hours ago
This 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.
Inucune@lemmy.world 1 day ago
This is why I stick to commodities: physical materials with real uses. Sure there can be tulip events but there is still a physical item being exchanged.
Mercer@lemmy.zip 11 hours ago
Bonds, cash and other countries stock market
nilloc@discuss.tchncs.de 20 hours ago
Financial advisers at Chase were suggesting sitting in cash for the week of the election. Funny thing was the guy we were talking to was referring to a memo he got and didn’t even realize what the 3rd of November was this year. Or at least he pretended not to know.
Shit might get crazy, but I’m sure the same Ashlee’s will profit no matter what.
Zwuzelmaus@feddit.org 1 day ago
Meanwhile, what I have lost since yesterday is somewhere around 0.2%. Background noise.
SatansMaggotyCumFart@piefed.social 1 day ago
I don’t really give a shit about short term ups and downs it’s long term trends I invest for and over the last twenty years I’ve done fantastic.
SaveTheTuaHawk@lemmy.ca 1 day ago
45% of the entire market is now in AI or AI adjacent.
People said the exact same thing around late 2007.
52fighters@lemmy.sdf.org 23 hours ago
Converted to cash or other assets not on the market.
Malica@lemmy.zip 1 hour ago
It’s not real. It’s just gambling for rich people. Occasionally they use it to steal from our retirement.