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Can the stock market go to zero?

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Re: Can the stock market go to zero?

#51

Post by NovaDudely »

TekMol wrote: post #10

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…

"If you should diversify, then that shows that each piece of your portfolio has a chance to go to zero. So the combined chance of going to zero is not zero either."

Sounds like Boltzmann distribution in action but in economics form. ;)

Re: Can the stock market go to zero?

#52

Post by nologic01 »

misja111 wrote: post #29
nologic01 wrote: post #21

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…

> there are conceivable circumstances where the "stock market" can go not just to zero but negative 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.

imagine a scenario where a pitchfork crowd is banging outside your doors claiming you are owning stock in an abominable entity

you frantically try to sell but there are no buyers at any positive price

finally a dodgy person shows up and is willing to "relieve" you of your stock, but at a price

Re: Can the stock market go to zero?

#53

Post by jowea »

bmitc wrote: post #19
TekMol wrote: post #10

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…

To be specific though, neither of the countries of modern China or Russia existed at those times. In particular, those two dates were revolutionary dates on which entire governments were replaced. There was more going on than just the stock markets. And as far as I can tell, at least with the Shanghai Stock Exchange, it didn't go to zero in 1950. It was simply closed and liquidated, and that implies that people got b…

I've seen diversification strategies that purport to take that into account, generally something like physical gold, investing in yourself and investing in a more stable country while with the investments under the jurisdiction of the more stable country.

And if the exchange was closed and liquidated due to a revolution, who are the investors getting whatever the market value was from?

Re: Can the stock market go to zero?

#54

Post by nologic01 »

infthi wrote: post #50
thetopher wrote: post #32

Earlier quoted context omitted.

I don’t know if these are good examples. Money and electricity both have inherent liabilities that don’t seem to translate to stock. At the end of the day, cash has to be transported and stored somewhere. Negative interest rates can be used to effectively pay somebody else to store your cash. A similar situation has happened with oil prices going negative. Negative electric rates could be used to increase load on a g…

In 2022, Meta was added to the list of terrorist and extremist organisations in Russia, and some people suggested that owners of Meta stock should be considered sponsors of terrorism. Do a few more steps and stock may become a liability.

yep, assuming nothing extraordinary will ever happen might be reasonable but its not spanning the full set of outcomes.

Re: Can the stock market go to zero?

#55

Post by NovaDudely »

osigurdson wrote: post #43

Of course stock markets can go to zero but they probably will not. It is impossible to prepare for myriad near-zero-probability Armageddon events so don't waste time thinking about them. Strengthen the cognitive noise gate, focus on things within your locus of control.

It is like theoretically you could just fall through the floor by just atomically shifting through it. It is possible but very unlikely before the heat death of the universe.

Stock markets are more likely than that but it is also something I wouldn't lose any sleep over.

Re: Can the stock market go to zero?

#56

Post by NovaDudely »

arcticbull wrote: post #6

Yes, if everyone dies. Next question?

The crazy thing is, if everyone suddenly vanished the stock market would continue while the power grid is still up and the automated high frequency trading continues. There is no value because there are no people to infer value but the structure of it would persist for a little while.

Re: Can the stock market go to zero?

#57

Post by bandrami »

panarky wrote: post #42
bandrami wrote: post #35

Earlier quoted context omitted.

Gold exchanges are like that too -- the amount of gold "held" by investors exceeds the world supply.

> exceeds the world supply People say this as if it's evidence of some dark, fraudulent conspiracy. But it's simply because the exchange allows traders to sell short. If Alice owns 100 troy ounces of gold held in her name at an exchange, and Bob borrows 50 troy ounces and sells them short to Charlie, then Alice owns 100 and Charlie owns 50 when there are really only 100 in the vault. People own more shares of Tesla t…

I get that about dollars and stocks, but people who hold gold out of fear that the music is going to stop don't realize the same musical chairs problem applies to precious metals unless you physically have custody of them.

Re: Can the stock market go to zero?

#58

Post by nologic01 »

hcks wrote: post #30
nologic01 wrote: post #21

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…

All the examples you give can be perfectly explained using arguments about rationality.

ex-post an extraordinary event a lot of people are wise and can "rationalise" how it did happen.

the question is whether one can rationalize what can happen before it does.

that requires understanding in depth what the system is and how it might behave in extremes

open any quantitative finance book older than a few years and it will tell you that interest rates cannot go negative because... blah blah... some cash arbitrage

it turns out that arbitrage is not implementable...

Re: Can the stock market go to zero?

#59

Post by nologic01 »

laeri wrote: post #36
nologic01 wrote: post #21

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…

Why would someone want to pay to get rid of their stocks? In the worst case they would be worthless or not?

if you own a stock that society comes to see as despicable you might get into a situation where you want to get rid of it at any price, including paying

clearly the company behind that stock is not viable if that sentiment persist but the negative market price is theoretically possible

Re: Can the stock market go to zero?

#60

Post by boeingUH60 »

contingencies wrote: post #11
stevenjgarner wrote: post #4

Earlier quoted context omitted.

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!

I offer to charge for advice, regardless of its utility. Alternatively, I offer to corrupt the regulatory oversight such that the entire thing becomes a pay-to-play arrangement whereby I am guaranteed a return but no liability for my selfless work.

Post-apocalypse Goldman Sachs CEO.
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