4 ms·

Doesn't that just prove that 1 dog = 2 cats and not that anyone was actually willing to pay $1 million for the dog? People are spending real money, that they co

Doesn't that just prove that 1 dog = 2 cats and not that anyone was actually willing to pay $1 million for the dog? People are spending real money, that they could equally well as spend on other things, on stocks - they're not just trading stocks, correct? The man in your story couldn't actually sell the dog to someone for $1 million, but people who own stock can sell for cold cash. Or am I wrong?

adventured 11y ago
You're correct. There's no actual basis validating anything on the order of $1 million for the two cats. That's the flaw in why the parent's example doesn't work, it never actually meets reality in any way. Market valuations don't only exist in theory. Market caps for eg public companies are generally given legitimacy through trading, routine liquidity, auditing of financials, and dozens of other processes and regulations that companies must conform to. You can sell your Microsoft stock for a very well known amount of dollars, under very well known terms, essentially any time you want during market hours; you can never sell those cats for $500,000. The difference between me claiming my right shoe is worth $50 billion, and owning all of Uber's stock and having that be worth $50 billion? People with a lot of money, and a lot of reputation, deciding that Uber is worth $50 billion, after typically having put their money where their mouth is and investing. To say nothing of Uber having a real business (meaning they can raise debt, have credit ratings, sales, cash flow, operating projections, et al), having a value that the IRS or an auditing firm or investors can actually assess, and so on. One is verifiable to some large degree, the other can never be anything more than an absurdity - I can very likely sell my Uber stock for a lot of value, even if I take a big discount; I can never sell my right shoe at even a 99.99% discount to the $50 billion.
ncallaway 11y ago
For small trades on the public market yes, you can trade for cash at approximately the price listed on the exchange at that moment in time. If Bill Gates wanted to liquidate his Microsoft stock, though, it's unlikely that his sale price would match the exchange. Once you get into trades of a significant portion of the company, there's not enough guaranteed to be enough liquidity at price listed on the exchanges.

adventured 11y ago

You're correct. There's no actual basis validating anything on the order of $1 million for the two cats. That's the flaw in why the parent's example doesn't work, it never actually meets reality in any way. Market valuations don't only exist in theory. Market caps for eg public companies are generally given legitimacy through trading, routine liquidity, auditing of financials, and dozens of other processes and regulations that companies must conform to. You can sell your Microsoft stock for a very well known amount of dollars, under very well known terms, essentially any time you want during market hours; you can never sell those cats for $500,000. The difference between me claiming my right shoe is worth $50 billion, and owning all of Uber's stock and having that be worth $50 billion? People with a lot of money, and a lot of reputation, deciding that Uber is worth $50 billion, after typically having put their money where their mouth is and investing. To say nothing of Uber having a real business (meaning they can raise debt, have credit ratings, sales, cash flow, operating projections, et al), having a value that the IRS or an auditing firm or investors can actually assess, and so on. One is verifiable to some large degree, the other can never be anything more than an absurdity - I can very likely sell my Uber stock for a lot of value, even if I take a big discount; I can never sell my right shoe at even a 99.99% discount to the $50 billion.

ncallaway 11y ago

For small trades on the public market yes, you can trade for cash at approximately the price listed on the exchange at that moment in time. If Bill Gates wanted to liquidate his Microsoft stock, though, it's unlikely that his sale price would match the exchange. Once you get into trades of a significant portion of the company, there's not enough guaranteed to be enough liquidity at price listed on the exchanges.