[flyboyjake]

I am not a market genious, so please help me understand if I am way off base. So far, whenever I hear about the massive sell off over the last few weeks, its always followed by "market investors have lost over a trillion dollars". I thought the markets were a zero sum game??? If someone looses money, someone else gains money. If someone sold, its only because someone else bought. Whats bad for one is always good for another...so why is it portrayed as bad for everyone?

 

[Declan]

Simple explanation:

You have ten people who each own $100 worth of ammunition. When they bought the ammunition, they each paid $100 for it. Something happens and they all decide that their ammunition is not going to be needed soon or worth much so they go to the ammunition market and put their stuff up for sale. But, because the rumors are already spreading about the future value of ammo, they can't get as much for it as they bought it for.

They all end up selling their formerly $100 holdings for $60. That morning, they had in their possession $100 worth of ammo. By the afternoon, they hold $60 in cash instead. Each is $40 poorer and as a whole, they as group have lost 40% of their wealth.

On the other hand, who ever bought the ammo is not any richer than they were before because all they did was to trade $60 in cash for $60 worth of ammo. Their net value has not changed to account for the $40 that simply vanished with the perception of the ammo value.

In conclusion, a lot of the value that exists in the world today is perceived value, not actual value.

 

[flyboyjake]

I dont understand...could you do it again with beers?

lol, j/k. Ill think on that and get back to ya...

 

[blueplanet]

They all end up selling their formerly $100 holdings for $60. That morning, they had in their possession $100 worth of ammo. By the afternoon, they hold $60 in cash instead. Each is $40 poorer and as a whole, they as group have lost 40% of their wealth.

Before the market crash, the big players have already sold and short-sold the stock at $100. The real crash happens during the time when they unwind their yen carry trades. And after the crash, they cover the short at $60, which means that they earn $40 from the sheeples.

Who are they? I think they are GS and UB$. They have the right software to play these games. They work for the gov. They need to earn this $40 from the sheeples in order to buy up the government bonds.

(PS. I was informed by an MM that the market may not crash too quickly now, because there are not enough players in the stock markets. Also, somewhere on the internet, it was mentioned that market crash is one of the way to finance a scheduled military operation. )

 

[aletoledo]

Each is $40 poorer and as a whole, they as group have lost 40% of their wealth.

The thing you've left out of your analogy is the initial seller that sold them the ammunition for $100. Let me re-frame your analogy.

You have ten people who each buy $100 worth of ammunition from Bob. (total: $1,000; group: $0; bob the ammunition guy: $1,000). They all end up selling their formerly $100 holdings for $60 back to Bob (total: $1,000; group: $600; bob the ammunition guy: $400).

Each is $40 poorer and as a whole, they as group have lost 40% of their wealth, but the system still remains zero-sum, Bob now has all their money. In essence, Bob rented them the ammunition for a period of time. They got their use from it and then returned it to Bob.

So I agree with flyboyjake, everytime the MSM tries to say that people lost money, they're covering the tracks for the rich that took the money from these investors. There is a reason that the government pushes the public into the market with 401k programs. They do it so that the rich can farm these people for money.

 

[Declan]

Yes, I was just giving a simplistic explanation as to how that particular group of investors lost money. The title implies "some" investors, not "all" investors. That being said, it's seldom that " Bob" is the one that actually buys back the stock at a lesser value thus in the process a theoretical destruction of wealth occurs since you are starting with Bob having $100 in cash and the buyer $100 in stock, just to end up with $100 and $60.

 

[drex]

"market investors have lost over a trillion dollars"

Your confusion comes because they leave out the second half of the sentence: "and the rest of the market investors have gained over a trillion dollars"

 

[Crackshot]

Let me take a stab at this.

Say there are 1,000,000 shares of a stock. Yesterdays close was $10 per share. thats 10 million in value.

Today 50 shares sold for $15 at the end of the day. well since thats the closing price now everyone that owns a share thinks thier share is worth $15 so worth of the company is now 15 million, see a 5 mil gain just from the sale of 50 shares.

Now lest say tomarrow its a bad day and at the end of the day over 1000 shares were sold and the closing price was $5. Now the shares of the enire company at $5 are worth 5 mil. Thats a ten million dollar loss even though only 1000 shares sold.

Its an illusion really. You see the market cap of a company relies on ALL shares being worth the same as the last share sold, and thats never the case. but thats how you can have money evaporate. The cash was never there to begin with, it was just a perception of what the company would have been worth had all of the stock been worth whatever the price of the last stock sold was.

This is why you dont want to be in the market when the boomers run to try and save themselves eventually. They own a LOT of stock and are looking to retire one way or another, and its about that time. And social security aint gonna cut it.

 

[woodyp]

It is quite simply another means for the transference of wealth from the little guy who can't afford to stay in the game at the same levels or length of time as the big guys can.

The Mega Market Movers Manipulate and cause the small fry to panic--thus selling cheaply. Rule#1 is DON'T PANIC!

I just love it when they say the markets "look ahead" for the next six months or so. Last weeks activity was a heluva lot closer to the next 6 minutes.

 

[Rascals]

Then you get some investors that wait for that and only buy ammo when theres alot of it for cheep and keep putting it away. So the next scare they can do it again and again. That way there never out.