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The Crash of ’87, from the Wall Street Players Who Lived It

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Re: The Crash of ’87, from the Wall Street Players Who Lived It

#41

Post by auxym »

Retric wrote: post #34
dagw wrote: post #24

Earlier quoted context omitted.

nothing about investing should revolve around if you need liquidity The knowledge that I can get out of my investment any time I want at the current market price makes me much more willing to invest in the first place. If I know that it can take several month to get out of an investment or that I have to sell at a discount to get a fast deal then I'm more likely to sit on more of my money in case I need it quickly.

In theory that's a big deal. In practice most people are looking at days to weeks to liquidate stock and that's not a big deal. As your holdings go up, into the billions, it can take months to years to unwind major investments without tanking the price. Further, having ~six months of living expenses outside of the market is considered prudent anyway. However, the reality is if the market disappeared today informal ma…

Months to years to liquidate stock? For most people?

I can't imagine selling a position would have any influence on price until it's a significant percentage of the market cap. The median cap of the Russell 2000 (an american small cap index) is 809 M [0].

Do most people really have multi-million positions in a single small cap company?

https://en.wikipedia.org/wiki/Russell_2000_Index

Re: The Crash of ’87, from the Wall Street Players Who Lived It

#42

Post by whatok »

ukulele wrote: post #2

The stories are interesting to get a sense of what things were like, but they fall short as evidence of who knew what was going on in the moment. Holding up a stock analyst who "saw it coming" is survivorship bias in the extreme.

I mean, I don't see it being depicted in any way besides "hey here's what I experienced". A lot of people actually mention being caught off-guard and taking massive losses on the Monday itself. The "stock analyst", Paul Tudor Jones, is probably the most famous one who "saw it coming" but knowing something is coming doesn't necessarily mean you are able to profit from it.

Re: The Crash of ’87, from the Wall Street Players Who Lived It

#43

Post by KGIII »

marak830 wrote: post #16
lmm wrote: post #13

Earlier quoted context omitted.

It's worth emphasising that if you just want to invest in a company, modern markets let you do so in an unprecedentedly cheap way: you can usually buy or sell with a penny spread (not legally allowed to be tighter, which is a whole other rant) virtually instantly. If we're really talking about the pure "stock market" then at this point it's pretty much a commodified, low-margin utility business. I'll assume you meant…

What I see from this is a while bunch of hand waving to say that 'there are a whole bunch of people between you and x business', despite the fact you can directly purchase their shares(which they offered to gain temporary income to make purchases before their cash flow allowed). I still don't see a reason why these people between you and the business have any useful reason to exist. Unless for gambling, Wich as far a…

I wouldn't buy shares in your company unless I had the legal right to trade and sell those shares to others. When I invest, I'm not just supporting you, I'm supporting me.

Re: The Crash of ’87, from the Wall Street Players Who Lived It

#44

Post by S_A_P »

marak830 wrote: post #7

A side note, and I'm really hoping someone can explain this. What benefit does the stock market provide to us? I understand investing in companies, but for me, and I'll admit a completely naive person to this whole system, it seems to have taken an 'inbest in company with money to help them succeed', to a 'who cares let's just cut and run to make the best profit'. I'm perfectly willing to take a link to a great expla…

Keep in mind that the stock market is only one part of the financial markets. There’s treasury (Tbill),forex, bond, metals, and derivatives of all of these(futures/swaps etc) and then other instruments used for hedging. All of these markets directly affect the movement of money all around the world.

Also keep in mind that most trades are executed with a hedge in place to prevent losses. The market is rarely a case of bet a million on black trades. That said my knowledge is comes from knowing how energy and metals are traded.

Re: The Crash of ’87, from the Wall Street Players Who Lived It

#45

Post by technofire »

Does anyone else find it surprising and remarkable that Paul Tudor Jones' monospaced letter is perfectly flush on the left and right margins with apparently no hyphenation nor additional inserted spaces within the lines? Surely this did not happen by coincidence (?).

Re: The Crash of ’87, from the Wall Street Players Who Lived It

#46

Post by Retric »

auxym wrote: post #41
Retric wrote: post #34

Earlier quoted context omitted.

In theory that's a big deal. In practice most people are looking at days to weeks to liquidate stock and that's not a big deal. As your holdings go up, into the billions, it can take months to years to unwind major investments without tanking the price. Further, having ~six months of living expenses outside of the market is considered prudent anyway. However, the reality is if the market disappeared today informal ma…

Months to years to liquidate stock? For most people? I can't imagine selling a position would have any influence on price until it's a significant percentage of the market cap. The median cap of the Russell 2000 (an american small cap index) is 809 M [0]. Do most people really have multi-million positions in a single small cap company? https://en.wikipedia.org/wiki/Russell_2000_Index

No not most people. But, if you own 60% of a company it can take a long time to unwind without impacting the price. Further the transion is smooth as selling 1 million in most stocks in a second would change the price.

Anyway, my point is simply that trades are the mechanism that changes price. So, you can't expect to sell arbitrary amounts of stock at the current clearing price.

Re: The Crash of ’87, from the Wall Street Players Who Lived It

#47

Post by Retric »

matwood wrote: post #40
Retric wrote: post #34

Earlier quoted context omitted.

In theory that's a big deal. In practice most people are looking at days to weeks to liquidate stock and that's not a big deal. As your holdings go up, into the billions, it can take months to years to unwind major investments without tanking the price. Further, having ~six months of living expenses outside of the market is considered prudent anyway. However, the reality is if the market disappeared today informal ma…

I hope one to one day have enough wealth that it takes months to liquidate my stocks. The number that can’t be liquidated almost instantly is very large. Additionally, IPOs are almost priced incorrrectly, and show the problems with the informal market.

I would not nessisarily say they are priced incorrectly, there is a liquidity premium. Also, post IPO there is often a tiny slice of the company on the market combined with a lot of speculation.

Re: The Crash of ’87, from the Wall Street Players Who Lived It

#48

Post by thedufer »

marak830 wrote: post #21
maneesh wrote: post #15

Earlier quoted context omitted.

you can raise capital by selling more shares. This allows you, as a business, to not have to turn a profit and still be in business.

That's not a profit. Thats temporary extra funds. A profit is performing a service that costs you less than you charge the client.

Temporary extra funds are exactly what you'd want if you saw that conditions were right to open a factory you couldn't afford, for example. Your shareholders are people who would like to take on the profit (and risk) of such an investment. This works in everyone's favor.

Re: The Crash of ’87, from the Wall Street Players Who Lived It

#49

Post by dagw »

Retric wrote: post #34
dagw wrote: post #24

Earlier quoted context omitted.

nothing about investing should revolve around if you need liquidity The knowledge that I can get out of my investment any time I want at the current market price makes me much more willing to invest in the first place. If I know that it can take several month to get out of an investment or that I have to sell at a discount to get a fast deal then I'm more likely to sit on more of my money in case I need it quickly.

In theory that's a big deal. In practice most people are looking at days to weeks to liquidate stock and that's not a big deal. As your holdings go up, into the billions, it can take months to years to unwind major investments without tanking the price. Further, having ~six months of living expenses outside of the market is considered prudent anyway. However, the reality is if the market disappeared today informal ma…

Even if liquidity in the stock market doesn't matter to you personally, it also allows for others build new 'products' on top of it that you might benefit from. ETFs and Index funds, for example, provide far more benefits to the average investor than access to a liquid stock market. However they wouldn't really exists in their current form (or at the very least be a lot more expensive) without a liquid marked underneath them.

Re: The Crash of ’87, from the Wall Street Players Who Lived It

#50

Post by dagw »

Retric wrote: post #46
auxym wrote: post #41

Earlier quoted context omitted.

Months to years to liquidate stock? For most people? I can't imagine selling a position would have any influence on price until it's a significant percentage of the market cap. The median cap of the Russell 2000 (an american small cap index) is 809 M [0]. Do most people really have multi-million positions in a single small cap company? https://en.wikipedia.org/wiki/Russell_2000_Index

No not most people. But, if you own 60% of a company it can take a long time to unwind without impacting the price. Further the transion is smooth as selling 1 million in most stocks in a second would change the price. Anyway, my point is simply that trades are the mechanism that changes price. So, you can't expect to sell arbitrary amounts of stock at the current clearing price.

How many people own 60% of a publicly traded company?
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