A Quick Teaching Lesson for People on STOCK OR BOND MARKET CRASHES - Where Does the "Money" Go?

IT DOES DISAPPEAR, during a market crash - or any loss (and opposite for gain) - most of it goes back into cyberspace, from which it came.

Roughly $1.2 or more billion (loss or gain) for each Dow point change. Ex...If Dow drops 100 points, approximately $125 billion is lost. This loss is directly felt, in full, by the owners of the stocks, making up the index.

HOWEVER, THERE IS NOT A COMMENSURATE $125 BILLION DOLLAR GAIN FOR THE "WINNERS"! ONLY A TINY FRACTION OF THE LOSS, ENDS UP AS "GAIN" BY SHORT-SELLERS. SO WHERE IS THE REST?

IT GOES BACK INTO CYBERSPACE! THIS IS WHY THE "MONEY REALLY DOES DISAPPEAR" . The same is true for bond/debt instruments: when there's a selloff, or if a loan (debt) is defaulted on ... or paid off, "money" disappears...the money supply shrinks in this case...again, as the "money" goes back into cyberspace. This is how fractional reserve banking works (in the age of computers).

All the best GLP,
jk

It disappears.
Stocks are priced via what others are will to pay for them.
So if you're holding a stock and it goes to zero that money is just gone.
The only way to make money on stocks is to find a bigger idiot to buy for a higher price.
It's a ponzi scheme.
It's good for the companies though as they are the issuer of the worthless paper that everyone is buying.

they, like you, are wrong. It doesn't disappear as stocks aren't money, they are simply valued in money.

The fiat ones and zeros WENT to whomever sold the bond or stock to the one holding it during a crash.

The stock or bond perceived "value" crashes. Just like the perceived "value" of a house can crash to half of what someone paid for it. The "money" went to whomever the holder of the stock/bond/mortage paid to get the so called rights for it.

Of course in this crazy world keeping track are millions of computers world wide playing games with each other in endless rounds of rising speculations and losses.

Respectfully,NO, ONLY A FRACTION OF THE TOTAL STOCKS ARE SOLD! (AT ANY MOMENT IN TIME, even during crash). It is ONLY THOSE that sold that get the higher price on a downdraft, when they have a buyer (whether big or small downdraft). THE VAST MAJORITY OF THE OTHER STOCKS DROP IN VALUE/PRICE, EVEN THOUGH THEY ARE STILL BEING HELD. (This is where the lion's share of the wealth is LOST!)

Again, most are not selling during a crash! Yet, they will have lost large dollars, AS THE PRICE CHANGES BY THE MARKET-MAKER OR PROGRAM.

The money goes to the people that sold.

Say I have 5 eggs and their price is dropping...the first egg I sell for $2

The second egg I sell for $1...the third & fourth egg I sell for fiddy cent each. The last egg I can't sell because the price has dropped to zero, nobody will buy it.

I ended up with 4 bucks out of the deal

To say this a different way...Most stocks (shares of total) are NOT SOLD during a crash. It's only a relatively small number that determines the price: for the rest.

And with a crash, "the rest" will be sitting there (still holding their stocks that they HAVE NOT SOLD), but with the price greatly reduced.

So WHO receives that HUGE AMOUNT OF DOLLARS LOST FROM (THESE MAJORITY UNSOLD STOCKS, "the rest")?

Answer: Cyberspace.

it goes away.

not all that glitters is gold

just like a new car loses value the moment ownership is transferred to the buyer

just like a new car loses value the moment ownership is transferred to the buyer

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I always hated that analogy because I didn't buy a new car inorder to sell it in 5 minutes.

You could say a burger from wendys loses ALL VALUE the second they hand it to you...but you didn't buy it to resell it...you bought it to eat it.

i'm not talking about its value to YOU. i'm talking market value.

Lets look at a quick example now, on the bond/debt side (instead of stocks/equities).

Lets look at two types: private and publicly-traded (both work similarly in terms of the big picture)...adding or subtracting from the money supply and how they operate affecting their pathway in cyberspace.

Private debt instruments
Lets say you found a nice home and it's all but done for a $500,000 mortgage loan (not that I would ever recommend this). Once the banker's signature(s) is completed, a half-million dollars of USD's NOW exists...that did not exist just a moment ago. (Wow, I bet most people never knew, that when they take out a loan, they've just increased the money supply by that amount.) When the loan is finally paid off, or if the loan is defaulted on (and subsequently "written-off" the books), the money supply just shrunk back by that same amount. Pretty straight forward.

Publicly-traded (bonds) debt instruments
These include municipalities and of course nation-states (world-wide), including the UST's debt instruments. When they need more funding, they get the approvals to issue the bond, then investors purchase them (Or a Investment bank may market them. But lately, per news even yesterday, our own Fed is now going to be the buyer of $60 billion/month of UST's). New money is created when this bond is created. And, like the Private debt instruments, when paid off, it decreases. One of the differences with Publicly-TDI's is that they are just that: publicly-traded: meaning their price discovery is usually done on a regular basis, through markets/market makers/programs/etc....including the risk (like stocks) of having a CRASH (in their prices). Now, the owner - even if the (publicly-traded price) drops like a stone - if it's held to maturity, can still receive the full/face price of the bond/note/bill,etc., plus whatever interest is paid. But, there's always the risk of the unknown, as to whether (the issuer) will make good on paying you the full price of the instrument, at maturity; this is one reason, bond owners usually never like seeing the (trading price) of their bonds, drop/collapse. (They can also trade at a premium). And it they sell it prior to maturity...they will have a gain or a loss (or break-even); but if after a crash in publicly-traded prices, they'll have likely, a loss (AND THAT LOSS IS GONE INTO CYBERSPACE, UNLESS SOMEBODY/ENTITY "SHORTED IT" WITH EQUAL PARAMETERS; UNLIKELY: THEREFORE MOST OF THE LOSS WILL JUST BE "WEALTH THAT WENT BACK INTO CYBERSPACE, AND IS THEREFORE LOST."

So...again, in our modern system of banking (w/fractional reserves; and perhaps fractions of fractions of reserves), and fast computers, "MONEY" IS CONSTANTLY, CREATED AND DESTROYED.

jk

The money doesn't go anywhere.

It never existed to begin with.

Most valuations are a fiction. Things come crashing down when more people realize that. The only thing keeping the markets propped up is confidence. The power of mass belief, or if you prefer, mass delusion.

Once that is gone, *pop!*

It stays in the hands of the market makers as CREDIT BALANCE, but the FED branches lay claim to it and work with the market makers to inflate or deflate. FED takes a large portion as tribute, and THAT portion is erased from the money supply.

I support myself by buying German cars for $200-$1200, fixing them and selling them again for WAY more. In real hourly wages, I get paid $500-$1000 per hour for my time. I realy love that you can create money from thin air like that. Recently bought and sold a Mini Cooper S and made $2500 per hour for my time.

I've explained it quite clearly I believe. IT'S ONLY THE FRACTION OF THE SHARES (THOSE SOLD) THAT DETERMINE THE PRICE (FOR ALL THE OTHER SHARES). Once that price is determined, the computers automatically/concurrently change the price to all holders of the other (non-sold shares).

There's nothing that remains: "as any credit balance" that you say - when the prices are adjusted.

Non sold shares are just shares. its not any $ at all until you sell it. shares are not $. The $ doesn't go anywhere because it's not $, it's shares.

Last Edited by Weyoun on 10/12/2019 03:47 PM

but but but, my paper receipt says this stock is worth $$$$$, I am owed that MONEY!!!!!


Next thing you will tell me is that all of those credit derivatives and swaps are just promises, that the money backing those promises doesn't exist.

THIS IS MY RESPONSE...IT WAS PUT IN THE WRONG PLACE: SO IT'S REPEATED:

Come on,

The dollar value CHANGES (with the non-sold shares)...they free-fall in price during a collapse. (Even if they're not sold)

Their NEW VALUE IS NOW LOWER...as I've explained above; the loss is about $1.2 to $1.3 billion dollars (of LOST VALUE) for every Dow point.

This lost value...is gone into cyberspace. It will only be made back...if the market goes back up.

Sometimes it doesn't exist. that's why they default sometimes.

Try buying some food with stock shares. you can't. it doesn't become tangible value until you sell it.

OP is clueless.
Nothing got lost in stock market. It just got taken out.

People put they month faithfully into the market. When market goes up, they pay a lot to get less stocks from those big boss or so called owners(mostly banks). When stocks goes down you get more stocks for your money. All depend how much cash put in to the market and how much cash people take out of the market. When there is a crash People might take out more or put in more. But no money get destroyed. The only thing got destroyed is the so called value. Money just transferred from one pocket to another. Not a penny will be lost.

the real take away in all of this is... derivatives.

Why the "money" may or may not (not) exist, the value did disappear and anyone who was using the now lower value of the assets they hold to purchase more are screwed.

This is why the system is so fragile... no one really knows just how leveraged everyone is, and, more importantly, the person who holds the leveraged asset might not collect.

The derivative dominoes are why the system could, literally, collapse in hours. Hence, the MBS scandal of 2008

Can you imagine if the markets were a zero sum game? If they couldn't create money out of thin air, they wouldn't have made it past the drawing board.

Of course that's true...I don't deny that. Nor have I said anything related to that. That has nothing to do with my thread/posts.

We're literally talking about apparently (acorns and basketballs)?

I don't know how else to put this.

I'm trying to explain things (about something in particular, namely, WEALTH THAT IS CREATED AND DESTROYED REGULARLY; ESPECIALLY DURING CRASHES - and few people REALLY KNOW WHAT HAPPENS: THEY JUST SEE THEIR STATEMENTS), and somehow, apparently I can't communicate this to you.

I honestly don't know why.

I don't mean any disrespect to you; I'm just confused by your responses.

There's NO wealth. The $ left the moment you handed it over for shares. Whoever sold you the shares has the $ now. You don't have the $, you have shares now.

Last Edited by Weyoun on 10/12/2019 04:14 PM

I support myself by buying German cars for $200-$1200, fixing them and selling them again for WAY more. In real hourly wages, I get paid $500-$1000 per hour for my time. I realy love that you can create money from thin air like that. Recently bought and sold a Mini Cooper S and made $2500 per hour for my time.

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Damn! Good on you man! That's the American way!!!

I'll try again,

What do you think happens when the market goes up 100 points and there's NOW, bigger paper gains (or thousands of points, like since President Trump came into office)?

Answer: Trillions of NEW USD's that NOW EXIST...THAT DID NOT EXIST PRIOR TO THOSE PAPER GAINS.

So if a crash happens...perhaps only 1 in 100 (MORE LIKELY, 1 IN 10,000 OR LESS) of the total number of shares get sold (they are the ones to get paid at the MM's price). THE REST - THE VAST MAJORITY - SEE THEIR VALUES OF THEIR STATEMENTS, SHAVED-OFF, HEAVILY.

So where did all that "money/digits/value" go? Only the 1 in 100 (OR 10,000) got paid...so the remaining loss is GONE! (AND, THAT REMAINING LOSS WAS NOT PROFIT TO THE 1 IN 100 THAT SOLD.) That remaining loss - borne by the masses, held in 401(k)'s, IRA's, Qualified and Non Qualified accounts, as well as all of the institutional money - is GONE (UNTIL AND UNLESS, THERE ARE GAINS TO MAKE IT BACK).

^^^This!

The Value disappears, money does not.
The Money used in all the transactions just changes hands.

"Value"(Notional Value) is not money.