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there is no such thing as "underwater" when it comes to stocks. In a big liquid market, like the stock market for big companies, the price reflects the true va
by yetanotherphd 13y ago
there is no such thing as "underwater" when it comes to stocks. In a big liquid market, like the stock market for big companies, the price reflects the true value.
- lotharbot 13y agoEven for big companies, the stock market isn't always liquid enough over the short term to reflect the true value. In March of 2008, a lot of big company stocks were selling for well under their expected long-term value because there simply weren't enough buyers with enough liquidity to keep up with the selling frenzy. Temporary spikes in supply (or demand) can drastically distort the value of any asset. [EDIT: clarity]
- deleted 13y ago[deleted]
- yetanotherphd 13y agoBut that was at the height of the financial crisis, that doesn't apply to gm stock today
- lotharbot 13y agoIt doesn't apply to the amount of gm stock an individual investor might hold, but it does apply to the amount of gm stock the government holds. Putting 26% of the company on the market would qualify as a spike in supply, and would distort the price.
- yetanotherphd 13y agoI didn't see any price spike
- lotharbot 13y agoI didn't say "price spike", I said "distort the price". There is no question that the government's large stake in GM -- and their desire to unload it over the next 6 months or so -- means that there is some degree of "oversupply" of GM stock. Investors, whether buyers or sellers, have to factor that into their decisions regarding GM stock. I'm not convinced that the market for GM stock is sufficiently liquid to mitigate that.
- toast0 13y agounderwater: the current market price for an asset you hold is less than the price you paid, or have the option to pay