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Can the stock market go to zero?

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Re: Can the stock market go to zero?

#61

Post by krab »

x-complexity wrote: post #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business itself hasn't filed for bankruptcy Then no: The last traded price will be non-zero, and all sellers will have withdrawn from that market, as without external pressures, sellers will just wait out until buyers return…

The last price may be non zero but the papers or electronic records your purchased may be worth zero because there will be no future buyer. That's what happened with the described revolutions.

Re: Can the stock market go to zero?

#62

Post by NoboruWataya »

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?

What if your stock was worthless or close to worthless and your broker/custodian was charging you a hefty fee to hold it for you? Then it could be rational for you to pay someone to take it off your hands.

While stocks have limited liability, there can still be costs associated with holding them which could theoretically drive their prices negative.

Re: Can the stock market go to zero?

#63

Post by chii »

bboygravity wrote: post #23
chii wrote: post #13

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…

> That means that 5*x of stock can "exist" even though that amount was never issued by the company.

that's totally fine if it was lent and re-lent out and short sold etc.

After all, you don't bat an eye that similar thing happens with cash!

The only problem i have with your explanation, which is also the only part i dont think is true, is that the broker's "fail to deliver" portion. The broker _owes_ the buyer a stock, and there's a clearing house that ensures the broker is good for their money. Which is why Robinhood stopped the purchases of GME at that short squeeze, because they can't place enough deposit to ensure that they _could_ make whole their buyers at the clearinghouse.

Re: Can the stock market go to zero?

#64

Post by chii »

bandrami wrote: post #57
panarky wrote: post #42

Earlier quoted context omitted.

> 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.

> people who hold gold out of fear that the music is going to stop don't realize [it also applies to them]

that's their own fault and lack of knowledge. Nobody has any responsibility to educate them but themselves.

Re: Can the stock market go to zero?

#65

Post by mrcwinn »

A stock is a contract. Can you have a contract when money isn’t exchanged? Or, can you a price change (from $0.01 to $0.00) when presumably there’s no more liquidity? I’m going with no, a stock cannot go to zero.

Re: Can the stock market go to zero?

#66

Post by justrealist »

globalise83 wrote: post #39
justrealist wrote: post #3

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.

Not if a totalitarian regime decides that you cannot own stock and live at the same time.

It's kind of pedantic but I would say that the market ceases to exist in those circumstances, not that it went to $0.

Re: Can the stock market go to zero?

#67

Post by bloak »

justrealist wrote: post #66
globalise83 wrote: post #39

Earlier quoted context omitted.

Not if a totalitarian regime decides that you cannot own stock and live at the same time.

It's kind of pedantic but I would say that the market ceases to exist in those circumstances, not that it went to $0.

Yes, it's pedantic, but I think you're right. A price of $0 should mean that people are buying and selling for $0, which isn't as stupid as it sounds because prices (of some things at least) can be negative, so why shouldn't they sometimes be exactly zero?

If there is no prospect of people buying and selling the thing any more, or the thing doesn't even exist any more, then the price went to $NaN, obviously!

Re: Can the stock market go to zero?

#68

Post by [deleted] »

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…

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