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When the stock market falls and loses value, does the (U.S.) economy actually lose money?

When the stock market falls and loses value, does the (U.S.) economy actually lose money?

  • Yes

    Votes: 7 53.8%
  • No

    Votes: 4 30.8%
  • Maybe...depends on...

    Votes: 2 15.4%
  • Don't know...never investing in stocks/bonds

    Votes: 0 0.0%

  • Total voters
    13
  • Poll closed .

Objective Voice

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A few days ago, I had an interesting discussion with some friends about the stock market and the economy when the question was asked:

When the stock market falls and loses value, does the economy actually lose money?

Thoughts?
 
Yes.... stock measures the value of U.S. Companies. Foreign people and countries could even purchase the companies at the lower price. Without a doubt the economy loses value.
 
Yes.... stock measures the value of U.S. Companies. Foreign people and countries could even purchase the companies at the lower price. Without a doubt the economy loses value.

That wasnt the question though, the question was about actual lost money

If I buy $100 in stock and it drops to $90 but then I wait and a month later its $130 and I sell, I never actually lost the money when the value temporarily dropped.
 
That wasnt the question though, the question was about actual lost money

If I buy $100 in stock and it drops to $90 but then I wait and a month later its $130 and I sell, I never actually lost the money when the value temporarily dropped.
Absolutely, you lost money!

Your asset value & liquidity is "marked-to-market".

If the stock subsequently comes back, you've gained money. Nothing less, nothing more.
 
Absolutely, you lost money!

Your asset value & liquidity is "marked-to-market".

If the stock subsequently comes back, you've gained money. Nothing less, nothing more.

You dont lose the money until you liquidate though, value ≠ money
 
You dont lose the money until you liquidate though, value ≠ money
No. You lost the money. It's not there. No different than if the IRS took 10 grand off your 100K, leaving 90. It's gone.

If you doubt me, try spending a 100K of that 90K trading account. Aint't gonna' happen, 'cuz it's not there!
 
As a youngster, I boldly stated that when I got old, all I would need was enough money to buy rubber tips for my cane and bottles of Geritol. (google it) As for the stock market, I was told, "stay for the long term." My question was, " what if I get to the end of the road scenario and the market is in the crapper when I want to get my funds out?" Well here we are, I am setting up a Go Fund Me site. Details to follow..............
 
No. You lost the money. It's not there. No different than if the IRS took 10 grand off your 100K, leaving 90. It's gone.

If you doubt me, try spending a 100K of that 90K trading account. Aint't gonna' happen, 'cuz it's not there!

You dont seem to get it. When you buy stock you are buying a part of a company, thats not money, it has value (an easily tracked and regulated value) but its not money. You have only lost money when you sell that portion of the company for less then you paid for it
 
You dont seem to get it. When you buy stock you are buying a part of a company, thats not money, it has value (an easily tracked and regulated value) but its not money. You have only lost money when you sell that portion of the company for less then you paid for it
Because you're unequivocally wrong here. You're playing with words.

That "money", "value", whatever the hell you call it - is gone. End of story. You can't sell it, you can't borrow against it, and if it was used as margin you're going to get a margin call.

Your confusion & error, is you're confusing the possibility of "future gains" with a concept where you "never lost". Which is completely fallacious. That stock may even lose further, for all you know. So your theory is bunk.

Don't confuse market value, with future value. And rather than trust your buddies, consider discussing it with a financial pro.
 
Neither the question posed by the OP, nor the answers given so far show an understanding of the equity markets or the measurements of the economy.

Capitalization of equity markets is not reflected in the GDP. Nor are bond and commodity prices, or SS and Medicare payments, or any other trust, insurance or annuity payouts. The GDP reflects the value of a product or service one time and one time only. The GDP reflects the actual value of an economy. No equity valuation is equated with the GDP.

Arguments have been made that the capitalization of equities reflect the productivity of the businesses represented by the equities, however, since equity values are often subject to emotion based trends rather than production ratios, equity values however argued are a poor tool for measuring economy values. As well, neither profits or gains from equity investments are reflected in GDP equations, but brokerage commissions as a result of a sold services are contributory to the GDP.



and just for kicks:

 
You dont seem to get it. When you buy stock you are buying a part of a company, thats not money, it has value (an easily tracked and regulated value) but its not money. You have only lost money when you sell that portion of the company for less then you paid for it

If you have 100 dollars and all of sudden we enter into a period of hyper inflation, have you lost money if you don't spend it?
 
Because you're unequivocally wrong here. You're playing with words.

That "money", "value", whatever the hell you call it - is gone. End of story. You can't sell it, you can't borrow against it, and if it was used as margin you're going to get a margin call.

Your confusion & error, is you're confusing the possibility of "future gains" with a concept where you "never lost". Which is completely fallacious. That stock may even lose further, for all you know. So your theory is bunk.

Don't confuse market value, with future value. And rather than trust your buddies, consider discussing it with a financial pro.

I think he is confusing this with the dollar cost averaging that you utilize with a long term investment like a retirement account - 401k or IRA. In that case, you did lose money at present, but its largely irrelevant to where you will be in 20 or more years when you actually start to spend that investment.
 
Because you're unequivocally wrong here. You're playing with words.

That "money", "value", whatever the hell you call it - is gone. End of story. You can't sell it, you can't borrow against it, and if it was used as margin you're going to get a margin call.

Your confusion & error, is you're confusing the possibility of "future gains" with a concept where you "never lost". Which is completely fallacious. That stock may even lose further, for all you know. So your theory is bunk.

Don't confuse market value, with future value. And rather than trust your buddies, consider discussing it with a financial pro.

No because of the ease of buying and selling stock you have forgotten that its not money. Sure a stock could lose value in further but you bought the company not an alternative currency
 
I think he is confusing this with the dollar cost averaging that you utilize with a long term investment like a retirement account - 401k or IRA. In that case, you did lose money at present, but its largely irrelevant to where you will be in 20 or more years when you actually start to spend that investment.
Yeah, it's simply difference in terminology, and not even what the OP asked.

I was just working with his 90K/100K loss example, which is a real loss.

And as I pointed-out, he's confusing "present value" with "future value".
 
No because of the ease of buying and selling stock you have forgotten that its not money. Sure a stock could lose value in further but you bought the company not an alternative currency
I feel your mincing words here, Crovax.

Your trading account will still be shy 10K, no matter how you justify it. Whether you value your equity in dollars, yen, or bitcoins, you still lost. You can't spend it. And you're hoping the future value will increase (which is never a given).
 
That wasnt the question though, the question was about actual lost money

If I buy $100 in stock and it drops to $90 but then I wait and a month later its $130 and I sell, I never actually lost the money when the value temporarily dropped.

Somebody bought at $130 and that person might need to sell at $100.

So for some investors the decline has resulted in actual dollar not just a paper loss.
 
No, you have lost purchasing power

Which means your asset has lost value. Similarly, a stock investment is only worth what it is worth at closing that day.
 
Somebody bought at $130 and that person might need to sell at $100.

So for some investors the decline has resulted in actual dollar not just a paper loss.
Exactly.

The point is, whether one sells or not, they incurred a real loss. They may or may not want to sell and realize it for IRS purposes, but regardless of their actions the loss was real. And if they used those assets as margin, they're liable for a margin call.
 
I feel your mincing words here, Crovax.

Your trading account will still be shy 10K, no matter how you justify it. Whether you value your equity in dollars, yen, or bitcoins, you still lost. You can't spend it. And you're hoping the future value will increase (which is never a given).

Again you dont seem to get the concept. While most people invest with the intention to sell at a higher price, you are still exchanging money for a good. Your intention to resell doesnt change thats you bought a good and not an alternative form of currency (unless thats what you actually bought). Lets switch it away from stocks and Ill use a real world example. Last January I purchased a video card for my computer for around $600. I exchanged my money for a good. I used it for 10 months or so and then I sold it for $800. So I made $200. However If I sold the video card after 3 months it would have only been worth around $500. Would you have deemed me to have lost money at that point? No because its a video card, its not expected to go up in value. I bought it at an agreed upon price based on the value at the time and only ended up selling it when the market changed. If I was forced to sell it at the $500 then I would have lost money, but just by owning it I didnt lose any money because my purchase was based on what it was worth when I bought the video card and I bought the video card itself not its future value.

You are right in some part that it is a semantical detail, as you clearly understand the base concept, but its an important distinction to make when look at how you view buying and selling stocks. If you view stocks as money then you are going to end up losing actual money

and If none of that has helped clarify things maybe the wire can

the-wire-quote-37-picture-quote-1.jpg
 
Which means your asset has lost value. Similarly, a stock investment is only worth what it is worth at closing that day.

True something is only worth what you can sell it for, but an asset only becomes currency when you choose to make that transaction.
 
Somebody bought at $130 and that person might need to sell at $100.

So for some investors the decline has resulted in actual dollar not just a paper loss.

It only becomes a money loss when you make the sale though, until you choose to sell it you have only lost the value of your asset
 
Again you dont seem to get the concept. While most people invest with the intention to sell at a higher price, you are still exchanging money for a good. Your intention to resell doesnt change thats you bought a good and not an alternative form of currency (unless thats what you actually bought). Lets switch it away from stocks and Ill use a real world example. Last January I purchased a video card for my computer for around $600. I exchanged my money for a good. I used it for 10 months or so and then I sold it for $800. So I made $200. However If I sold the video card after 3 months it would have only been worth around $500. Would you have deemed me to have lost money at that point? No because its a video card, its not expected to go up in value. I bought it at an agreed upon price based on the value at the time and only ended up selling it when the market changed. If I was forced to sell it at the $500 then I would have lost money, but just by owning it I didnt lose any money because my purchase was based on what it was worth when I bought the video card and I bought the video card itself not its future value.

You are right in some part that it is a semantical detail, as you clearly understand the base concept, but its an important distinction to make when look at how you view buying and selling stocks. If you view stocks as money then you are going to end up losing actual money

and If none of that has helped clarify things maybe the wire can

the-wire-quote-37-picture-quote-1.jpg
I'm at a loss to understand your technical differences here, because here is the post of yours I commented upon, and we're clearly talking in terms of USD.

That wasnt the question though, the question was about actual lost money

If I buy $100 in stock and it drops to $90 but then I wait and a month later its $130 and I sell, I never actually lost the money when the value temporarily dropped.
 
I'm at a loss to understand your technical differences here, because here is the post of yours I commented upon, and we're clearly talking in terms of USD.

I never said we wernt talking in terms of USD.

You dont seem to understand the correlation because its much easier to identify the dollar value of a stock than a retail good so you have conflated value with money.
 
That wasnt the question though, the question was about actual lost money

If I buy $100 in stock and it drops to $90 but then I wait and a month later its $130 and I sell, I never actually lost the money when the value temporarily dropped.

Well... of course... because you waited for the stock to increase in value.... obviously. Money in and of itself works this way, the U.S. dollar varies in value depending on the day/month/year... you will LITERALLY lose money if your dollar is weak, you can buy more things if the dollar is strong.
 
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