Can the stock market go to zero?
afrugaldoctor.com
Can the stock market go to zero?
1–10 of 68 posts
Re: Can the stock market go to zero?
#2Can an asteroid hit the earth?
Re: Can the stock market go to zero?
#3No, it can't.
I am the backstop. If the stock market goes to $1 I will personally buy all public companies in the US using the change I found underneath my couch. I am willing to make this personal sacrifice to maintain the financial stability of the free world.
It's not a burden I take lightly, but it's one I take of my own volition.
Re: Can the stock market go to zero?
#4No, it can't. I am the backstop. If the stock market goes to $1 I will personally buy all public companies in the US using the change I found underneath my couch. I am willing to make this personal sacrifice to maintain the financial stability of the free world. It's not a burden I take lightly, but it's one I take of my own volition.
I offer to buy your position for $2.00 giving you a 100% upside profit and doubling the value of the US stock market. Capitalism is awesome!
Re: Can the stock market go to zero?
#5No, it can't. I am the backstop. If the stock market goes to $1 I will personally buy all public companies in the US using the change I found underneath my couch. I am willing to make this personal sacrifice to maintain the financial stability of the free world. It's not a burden I take lightly, but it's one I take of my own volition.
If you actually read the article, do you think your strategy would have worked in China when communism took over?
The article itself presents a much better reasoned account of all this than your comment.
Re: Can the stock market go to zero?
#6Yes, if everyone dies. Next question?
Re: Can the stock market go to zero?
#7>> According to statista.com, somewhere between 19,000 to 60,000 businesses file for bankruptcy every year in the United States, although not all of these are publicly traded companies.
Understatement of the year? About 20-200 public companies go bankrupt in a year [1]. So about 0.01% of the numbers quoted.
"Not all" is doing some heavy lifting there.
[1] https://www.jonesday.com/en/insights/2022/01/the-year-in-ban....
Re: Can the stock market go to zero?
#8“It would, in fact, take a catastrophic event involving the total dissolution of the US government and economic system for this to occur.”
As Hamlet would say, aye, there’s the rub. Economic collapse is actually far more frequent than is commonly believed, here survivorship bias of the US economy plays a staring role.
In the past century Chinese and Russian investments went to zero, not just stock but land, businesses, private property, it all went to zero. This is the largest country by land area and the largest by population. Given the average lifespan of empires is around 250 years, and the USA is going to be that soon in 2026, it may be even more likely.
Mathematically, do you believe perpetual growth in stock values and in concomitant asset inequality is feasible or even possible? Dubito ergo sum.
Re: Can the stock market go to zero?
#9- If trading's only done between individuals,
- AND there are no market makers / liquidity pools,
- AND none of the holders of a stock have external pressures to sell (futures/options),
- AND the business itself hasn't filed for bankruptcy
Then no: The last traded price will be non-zero, and all sellers will have withdrawn from that market, as without external pressures, sellers will just wait out until buyers return to the market. In the interim, the price would remain fixed to the last traded price until trades resume.
It is fundamentally irrational to sell a stock at 0 under these narrow circumstances, when compared to the infinitely better option of just waiting until market trades resume.
Otherwise, yes.
- MMs/LPs create 'synthetic buyers' by facilitating order fulfillments, taking on some risk in hopes of making a return via the spreads in between buy & sell orders. Their participation, even in extreme circumstances, mean that price discovery continues even when everyone wants to withdraw from the market.
- Futures & options create obligations for buys/sells in the future due to the nature of said instruments.
- The bankruptcy portion is self-explanatory: A stock is worthless is there's no business to back the claim up.
Re: Can the stock market go to zero?
#10So the stock markets of two of the biggest countries in the world (Russia and China) went to zero quite recently (1917 and 1949). And the author summarizes that stock markets can't go to zero? How does that make sense?
Even his closing statement contradicts itself:
So in conclusion, rest assured
that as long as you are properly
diversified, your stock investments
won’t go to zero.
This brings up an interesting question: How high is this long-tail risk of a European investor who invests in US stocks? The risk that Europe at some point decides to seize their peoples stocks. Or that the US decides to not respect holdings by Europeans anymore.
What happened to Chinese and Russian people who held US stocks which they bought via the Chinese/Russian stock market? Did those investments got wiped out too? Did their governments seize those? Or did the remeining investors in the US had a gain from the Chinese/Russian investors "disappearing"?