Will take a while for the stock market to recover

Discussion in 'Trading' started by Ayn Rand, Oct 11, 2018.

  1. Ayn Rand

    Ayn Rand

    Stock trading is not a zero sum game. When someone loses money, someone else does not receive that money. When stocks go down and stay down the implied money just disappears. This makes it harder to rebuy the shares that have gone down. The money is just gone. If it is actually stocks, I don't have the money and you don't have the money. It is just gone.

    This, plus margin calls and mutual funds redemptions will make it hard for the market to recover quickly.
  2. tommcginnis


    If I recall the S&P earnings, the market should be about 2350.
    It's still kissing 2750 smack on the lips.

    So, what I *think* it should be -- long term?
    And what *reality* will show me -- tomorrow?
    Gonna be different things.
    I'd risk $16 going long right now (2745), exiting with a stop at 2729 if needed.
  3. Most are at the mercy of their pension fund managers, who passively invest. Month ending statements will show downdraft. As before most will hold through and not sell ..similar to Jan of this year.

    Most everything is in bonds, even children’s 529s.. waiting for something monumental before shifting allocations.
  4. Ayn Rand

    Ayn Rand

    Maybe there is a different S&P 500. I have the close at 2728.37. Not saying market will not go back up but it will take a while, if even, to get back full recent losses.

    People will be in shock with bond funds. My understanding is that when interest rates go up bond prices go down. And hence holdings in bond funds decrease. This should have already started to happen. Many people think bond funds are like CD's.

    Truth - interest rate move has been overblown. Read some article where 5% is the real tipping point and doubt that will be any time soon.

    As an aside - market exists to slowly drain pension funds and 401k's.
  5. Amahrix


    Will take a while for the stock market to recover”

    No one knows what tomorrow holds.

    In short.. no one knows!

    Insure your $ against the effects of unexpected market drops like you insure your home and car against losses. Same concept... why do people not get it?

  6. Ayn Rand

    Ayn Rand

    What I was really trying to do is bring out the nuance that the stock market unlike the options or futures market is not a zero sum game. When stocks go down money just disappears. No one is on the other end to receive it. When money disappears there is less money to rebuy stocks after a decline. When it is a substantial decline the effect is more pronounced.
    tommcginnis likes this.
  7. Overnight


    This makes zero sense.

    If I own a company, and I issue paper shares to you all, and you guys do all your falderal with trading your stock certificates, how do those paper shares then just evaporate into nothingness at the end of a year when I want to call them back in, or whatever?
  8. Big AAPL

    Big AAPL

    I had to look this up. LOL Kudos
    zghorner likes this.
  9. Ayn Rand

    Ayn Rand

    It is not the stock certificates that disappear, it is the value of the shares.

    1,000 shares at $100 = worth $100,000

    stock goes down to $50

    1,000 shares at $50 = $50,000

    $50,000 has disappeared not the shares themselves.

    With a futures contract if you make $1,500 someone has lost $1,500 = zero sum
    tommcginnis likes this.
  10. Overnight


    Mmm. Well, now that you have decided to throw derivatives into the mix, that complicates things. But the underlying is the same.

    "1,000 shares at $100 = worth $100,000

    stock goes down to $50

    1,000 shares at $50 = $50,000

    $50,000 has disappeared not the shares themselves..."

    ( @vanzandt (Need your backup here on this one, because yer a stock dude...))

    Ayn, the money did not vanish into nothingness. The shares still hold a value.

    For example, if my company is worth $100,000, and I issue 2,000 shares at a value of $100 per share, and EVERYONE in the universe decides it is a great buy and buys them all up, then my company, the recipient of your dollars, has gone up by 100%. ($200,000).

    My company is now worth $200,000, and the share price goes up to $200 per share.

    So now I, the company, take out a loan based upon that $200,000 valuation for $100,000. I have taken your share money you have given me and got a loan for the $100K.

    That is on the books, but not reflected in the share price yet, because it has not been disclosed.

    I screw up somehow, and the company loses $100K in value. Now the shares are worth only $50 per share. You sell the shares for what your bought in at. You got back your initial investment, and the shares are now available for someone else to take a chance and feed back in another $100,000 into the company. And maybe it is me, the company. I buy back those shares I have sold you, with the loan I received from the bank, and have brought the company back up to $200K valuation.

    Yes, I am still in debt for $100K, but the money represented by the shares did not disappear...It did not vanish.. It simply transferred in one form or another to someone else. The share value of the company changes, but the money itself does not disappear.

    Money (and monetary value) is like energy...It never is created or destroyed...It is only transferred from form to another.

    And chill, man. Just dig.

    #10     Oct 11, 2018