21–30 of 68 posts
Argumemts about rationality and arbitrage are good for quantitative finance books and the make-believe worlds they construct. They dont define the limits of what can actually happen in human economies.
No, 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.
Ironically, that's not how it would play out. When a company goes bust it isn't worth 0. Its actually worth way less year 0. (In other words it owes creditors money.) Yes, it'll own some assets, customer lists, trade marks, copyrights, maybe even property, vehicles, desks, a coffee machine, whatever [1]. The liquidator will come in, assess quickly how much everything is worth, then plan how to spend as much time as p…
Absolutely true.
So 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. If you should diversify, then that s…
> who held US stocks which they bought via the Chinese/Russian stock market it would depend on what it means to hold stock "via the stockmarket". If those chinese/russian citizens had a legal entity in the US, and purchased via a US broker, then they ought to be able to claim legal ownership of those stocks they purchased. If, on the other hand, the stock was purchased on custody by a chinese/russian entity, then the…
This is a funny sentence if you know how US brokers operate, because: -- The stock is registered at Cede and Co. In your broker's name (not the client's name). -- Most US brokers don't hold all the stock that their clients "have" in their account. They lend out stock with or without the client's approval. -- It has happened that a broker doesn't own the stock that any of their clients bought through them at all. -- Brokers can buy unsettled stock for clients which subsequently "fails to deliver". Meaning: the client gave the broker money to buy a stock, the broker gave nothing in return (but claims that the client has a stock even though it was never delivered). -- In the US it is entirely possible that a company on the stock market offers x amount of stock and market participants short 2x while 3x amount of call options are in the money to be delivered and brokers are on the hook for that. That means that 5*x of stock can "exist" even though that amount was never issued by the company. Source: this is what happened during January 2021 short squeeze.
So yeah, you have legal ownership. Until you suddenly don't at some point in the future.
The currency stocks are traded in could probably get devalued by hyperinflation so that it’s effectively zero. But not nominally. But that would only affect one market (well, ir depends on how one defines market).
In a hyperinflation world it's the opposite. Stocks go up in value (in proportion to the inflation) since they become a better vehicle of wealth than cash. Indeed this is true for normal inflation too. Stocks, commodities, and so on are hood hedges against inflation primarily because the thing they are based on is "not cash". In an inflation world it is -only- cash which deflates. Everything else (that is real), more…
So 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. If you should diversify, then that s…
It is obvious that the political power can decide to abolish the market (Russia and China) and that's another issue.
Earlier quoted context omitted.
> who held US stocks which they bought via the Chinese/Russian stock market it would depend on what it means to hold stock "via the stockmarket". If those chinese/russian citizens had a legal entity in the US, and purchased via a US broker, then they ought to be able to claim legal ownership of those stocks they purchased. If, on the other hand, the stock was purchased on custody by a chinese/russian entity, then the…
> via a US broker, then they ought to be able to claim legal ownership of those stocks they purchased. This is a funny sentence if you know how US brokers operate, because: -- The stock is registered at Cede and Co. In your broker's name (not the client's name). -- Most US brokers don't hold all the stock that their clients "have" in their account. They lend out stock with or without the client's approval. -- It has…
No, 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.
Ironically, that's not how it would play out. When a company goes bust it isn't worth 0. Its actually worth way less year 0. (In other words it owes creditors money.) Yes, it'll own some assets, customer lists, trade marks, copyrights, maybe even property, vehicles, desks, a coffee machine, whatever [1]. The liquidator will come in, assess quickly how much everything is worth, then plan how to spend as much time as p…
I've seen scenarios where creditors and owners work together. In practice what this means is that one or two big creditors - usually friends with the owner, or unofficial partnership - get their money back, dozens of small suppliers and other unsecured creditors get shafted.
Stock market != economy. If the stock market crashed overnight, the economy would take a hit, but the expectation would be for it to be functional.
Electricity prices can go negative, interest rates can go negative, so yeah, there are conceivable circumstances where the "stock market" can go not just to zero but negative. I.e., people paying something to get rid of their stock ownership. Argumemts about rationality and arbitrage are good for quantitative finance books and the make-believe worlds they construct. They dont define the limits of what can actually ha…
No there are not. As a shareholder you cannot be held accountable for losses of the company you're holding the shares of. In the worst case, your share becomes worthless.
Electricity prices can go negative, interest rates can go negative, so yeah, there are conceivable circumstances where the "stock market" can go not just to zero but negative. I.e., people paying something to get rid of their stock ownership. Argumemts about rationality and arbitrage are good for quantitative finance books and the make-believe worlds they construct. They dont define the limits of what can actually ha…