4 ms·

Evaporate? When you buy a stock for $10, that is the moment when your $10 are gone -- not the minute it plummets. If you can sell it later for $15, congrats, th

by dualogy 15y ago

Evaporate? When you buy a stock for $10, that is the moment when your $10 are gone -- not the minute it plummets. If you can sell it later for $15, congrats, that is the moment where you can realize a profitable "exit". But in the meantime -- every second of it -- don't ever count on that stock, bond or other 'vehicle' to "hold your $10 through the winds of change" or protect it against changes in the perceptions and opinions of all the other gamblers, investors, savers, market participants around the globe. Any given day, its "ticker value" merely reflects the value judgments of the relatively small number of co-owners that happen to buy or sell the same asset that day -- it never reflects "your net wealth". Your net wealth is your cash, house, car, brain, any other physical asset -- minus any money you spent on counter-party future obligations, promises, thoughts, hopes -- speculation. That stock you bought? It can be $1 or $100 tomorrow or in 10 years, and you only ever know it when it's time to sell. Was money lost? Sure -- but not last week or today -- rather, on the day the individual investor bought into these markets. Anecdotically, I made a few nice profits with Bitcoins back in May/June when they were all the rage -- but I never ever confused them with physical wealth, I knew the nature of my gamble and I timed my exit -- not perfectly, but good enough to convert this "digital profit" or "paper profit" back into "physical goods". I'm not a full-time trader or gambler and I believe in investing my time more productively, but at the same time, sometimes it's fun to play money games. Too bad so many people on a world-wide scale believe it's a smart idea for their retirement estate to "take on debt to 'invest' in others' debts". This has been going on for a long time but it's not especially sustainable or otherwise inspiring -- especially since the debts are now backed by the children of your children. Think I'm off-topic by now? Think again!

dpark 15y ago
You do realize that cash is not a true physical asset, right? You can hold it in your hand, but it has no intrinsic value. The only value it holds that that which others assign to it, not unlike a share of stock.
- dualogy 15y ago
  Good thoughts -- I did and do realize it, in fact! Some price stocks in currency, some value currency in stocks. Some price oil in currency, some "currency" in "oil". Some price gold in currency, others value currency in how much gold it buys (oil producers, for example!) That said, by "physical wealth" indeed I didn't really mean paper currency or receipts for commerce and I mentioned this mistakenly to "soften my message" for those purely and fully entangled in the paper world of yesteryear.
  - dpark 15y ago
    My point is that you're talking about investments as if they are instantly gone and that this is some special case. "Was money lost? Sure -- but not last week or today -- rather, on the day the individual investor bought into these markets." This is incorrect, or at least it's not very meaningful. There's nothing special about stocks that make wealth disappear instantly. If your wealth is gone the second you invest in stocks, then it's also gone the instant you purchase oil futures, buy dollars/euros/your-favorite-currency, purchase gold, put it in the bank, or pretty much anything else. Any asset you obtain today really has only the value that someone else will assign to it when you wish to unload the asset at some point in the future.
    - dualogy 15y ago
      "If your wealth is gone the second you invest in stocks, then it's also gone the instant you purchase oil futures, buy dollars/euros/your-favorite-currency, put it in the bank, or pretty much anything else." Agreed! "purchase gold, " -- disagree: You're right on all counts but you're simply expressing my point more "extremely" than even I did myself... certainly, every trade of physical or digital goods is a subjective value judgment of both parties involved. In fact, stocks are a lot more "solid" as an "investment" in my book than pure debt and bonds and "financial vehicles" etc. But then, another question is how many of "working peoples' savings" should be entrusted to the ever-swinging daily judgments of full-time traders and speculators, 'wealth advisors', 'funds and trusts' that always chase yesterday's bubble and collect their commissions one way or the other. If capital goes into real estate, surely enough new condos spring up in Florida and Bangkok. If capital chases dot.coms, new dot.coms get created left and right. Tulips can be grown at will, too! Certainly, paper wealth can be multiplied indefinitely in nominal terms, but not in "real terms". The question then is, what are "real" terms? Well what happens when capital, tired of all the bubbles, runs into Bitcoins? They cannot be duplicated easily but boy can they be hacked. Bonds? Safe to bondage the tax-payers of 2030, today, is it? Ultimately, savings and holdings that are not "for-play money" will have to return to seeking protection in stuff that cannot be hacked by smart script kids or replicated and duplicated at will or by 'economic emergency laws' -- savings will at some point no longer be entrusted to better-dressed Madoffs -- they will have to seek assets with a long history book of storing wealth generated by productive past work well into the future for reference. That could be Mona Lisas but there's only one of them. Or that could be any other tangible, non-hackable, fungible, liquid physical good that has no competing industrial use, most importantly cannot be produced or increased in quantity at will and has been valued consistently by the kings and millions of "normal people" around the world for millenia well into the present. Sure, the "currency prices" of such assets may well fluctuate but the mere storage of savings function might well out-perform today's vehicles and instruments over the long term. Plus, as you already noted, currency does not reflect "intrinsic" value either so these nominal fluctuations are a laughing matter at best :) But wait, couldn't this be said of stocks either? Exactly! Long-term savers will know this and not panic much. But those who talk about "wealth that evaporated" -- they were likely trading and speculating for a paper profit next week or month, not for "value-investing" or "storing savings". So both you and me shrug at them and say, "look again, no real wealth did evaporate! No factory collapsed, no car or house mysteriously disappeared..."

by dualogy 15y ago

dpark 15y ago

You do realize that cash is not a true physical asset, right? You can hold it in your hand, but it has no intrinsic value. The only value it holds that that which others assign to it, not unlike a share of stock.

dualogy 15y ago
Good thoughts -- I did and do realize it, in fact! Some price stocks in currency, some value currency in stocks. Some price oil in currency, some "currency" in "oil". Some price gold in currency, others value currency in how much gold it buys (oil producers, for example!) That said, by "physical wealth" indeed I didn't really mean paper currency or receipts for commerce and I mentioned this mistakenly to "soften my message" for those purely and fully entangled in the paper world of yesteryear.
- dpark 15y ago
  My point is that you're talking about investments as if they are instantly gone and that this is some special case. "Was money lost? Sure -- but not last week or today -- rather, on the day the individual investor bought into these markets." This is incorrect, or at least it's not very meaningful. There's nothing special about stocks that make wealth disappear instantly. If your wealth is gone the second you invest in stocks, then it's also gone the instant you purchase oil futures, buy dollars/euros/your-favorite-currency, purchase gold, put it in the bank, or pretty much anything else. Any asset you obtain today really has only the value that someone else will assign to it when you wish to unload the asset at some point in the future.
  - dualogy 15y ago
    "If your wealth is gone the second you invest in stocks, then it's also gone the instant you purchase oil futures, buy dollars/euros/your-favorite-currency, put it in the bank, or pretty much anything else." Agreed! "purchase gold, " -- disagree: You're right on all counts but you're simply expressing my point more "extremely" than even I did myself... certainly, every trade of physical or digital goods is a subjective value judgment of both parties involved. In fact, stocks are a lot more "solid" as an "investment" in my book than pure debt and bonds and "financial vehicles" etc. But then, another question is how many of "working peoples' savings" should be entrusted to the ever-swinging daily judgments of full-time traders and speculators, 'wealth advisors', 'funds and trusts' that always chase yesterday's bubble and collect their commissions one way or the other. If capital goes into real estate, surely enough new condos spring up in Florida and Bangkok. If capital chases dot.coms, new dot.coms get created left and right. Tulips can be grown at will, too! Certainly, paper wealth can be multiplied indefinitely in nominal terms, but not in "real terms". The question then is, what are "real" terms? Well what happens when capital, tired of all the bubbles, runs into Bitcoins? They cannot be duplicated easily but boy can they be hacked. Bonds? Safe to bondage the tax-payers of 2030, today, is it? Ultimately, savings and holdings that are not "for-play money" will have to return to seeking protection in stuff that cannot be hacked by smart script kids or replicated and duplicated at will or by 'economic emergency laws' -- savings will at some point no longer be entrusted to better-dressed Madoffs -- they will have to seek assets with a long history book of storing wealth generated by productive past work well into the future for reference. That could be Mona Lisas but there's only one of them. Or that could be any other tangible, non-hackable, fungible, liquid physical good that has no competing industrial use, most importantly cannot be produced or increased in quantity at will and has been valued consistently by the kings and millions of "normal people" around the world for millenia well into the present. Sure, the "currency prices" of such assets may well fluctuate but the mere storage of savings function might well out-perform today's vehicles and instruments over the long term. Plus, as you already noted, currency does not reflect "intrinsic" value either so these nominal fluctuations are a laughing matter at best :) But wait, couldn't this be said of stocks either? Exactly! Long-term savers will know this and not panic much. But those who talk about "wealth that evaporated" -- they were likely trading and speculating for a paper profit next week or month, not for "value-investing" or "storing savings". So both you and me shrug at them and say, "look again, no real wealth did evaporate! No factory collapsed, no car or house mysteriously disappeared..."