Why isn't anyone discussing what is going on?

Maverick, I read many of your other posts and you seem like a sincere and helpful guy. I appreciate your attempt at educating me on the subject, however, I will still have to respectfully disagree. I will say that it is very nice to come and have a civil discussion without ego and arrogance coming into the debate. As traders, we are all competitive by nature, and i want to say that I appreciate your helpful spirit. I do believe that wealth is created as stocks rise and wealth destroyed as stocks fall. In the end, it's all academic as we are all here to make money in the markets and leave the economics to the professors. Nice chatting...:)
 
Quote from hans37:

I follow the futures example but the stock market does not work that way.


In the stock market everybody thinks they can exit at some specific price usually the last close and imagine they have the money.

Of course that wealth effect is just an illusion because obviously everybody can't exit and get that price.
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No, it does not matter what people THINK. It matters only what they can get for their stock. I don't understand why this concept is so hard to understand. Surely I am not the only college educated trader on ET. LOL. Folks, in order for a transaction to take place, there must be both a buyer and a seller! If the stock is just gyrating pre-market with bids and offers, no wealth is being transferred!!!!!!!

Wealth has no barring on people's imagination. In this world we deal with currency. And until currency is exchanged, no wealth transfer takes place. I don't care what people imagine. Me imagining that Scarlett Johansson is in my apt. right now does not make it so. LOL.
 
Quote from NTB:

Unrealized gains and losses are a very real item on all balance sheets! :)
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Sure, but they have nothing to do with the transfer of wealth. Hell, Nick Leeson use to mark his positions up overnight so Barings Bank would not be the wiser to what he was doing in Singapore. However, that didn't change the fact that Barings Bank was actually transferring their wealth without their knowledge to other speculators and banks on SIMEX.
 
Quote from NTB:

In the end, it's all academic as we are all here to make money in the markets and leave the economics to the professors. Nice chatting...:)
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Again, this is not mathematically possible. The only way it could happen is if the Federal Government was actually creating currency to buy stock from you. In that example, money is being created. But when stock prices go higher, someone is buying that stock. Your net worth is increasing at the expense of the buyer who is relieving you of your stock. Yes, you are getting wealthier, but at the expense of the new buyer who now owns your stock! It's been fun chatting with you.
 
Quote from Maverick74:

No, it does not matter what people THINK. It matters only what they can get for their stock. I don't understand why this concept is so hard to understand. Surely I am not the only college educated trader on ET. LOL. Folks, in order for a transaction to take place, there must be both a buyer and a seller! If the stock is just gyrating pre-market with bids and offers, no wealth is being transferred!!!!!!!

Wealth has no barring on people's imagination. In this world we deal with currency. And until currency is exchanged, no wealth transfer takes place. I don't care what people imagine. Me imagining that Scarlett Johansson is in my apt. right now does not make it so. LOL.
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That's a nice post but you had to ignore my last line in order to make your point.

my comments were directed towards what is often called "the wealth effect".
 
Quote from hans37:



Of course that wealth effect is just an illusion because obviously everybody can't exit and get that price.
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Wealth effect is worthless. Your wealth on paper will fluctuate daily. Your actual wealth is only realized when a transaction has occurred. Again, what people really think they are worth is irrelevant. It doesn't matter where the exits are and who can get what price. When they sell, someone else's wealth is being transferred to them. It's as simple as that.
 
Quote from Maverick74:

Wealth effect is worthless. Your wealth on paper will fluctuate daily. Your actual wealth is only realized when a transaction has occurred. Again, what people really think they are worth is irrelevant. It doesn't matter where the exits are and who can get what price. When they sell, someone else's wealth is being transferred to them. It's as simple as that.
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You must be a professor because you are obtuse and like to hear yourself talk.
 
Quote from hans37:

You must be a professor because you are obtuse and like to hear yourself talk.
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I honestly can't make myself more clear. If you don't understand this concept, I take it you never stepped foot on a college campus or ever took an economics course. This is a very basic concept to understand. For some odd reason, you have yet to contradict any of my points yet continue to think you have. Every transaction has a net effect of ZERO! LOL. Think about this please before you post.
 
Hans,

I understand your point, however, there needs to be some reference point for calculation of wealth and/or net worth. Generally speaking, most of us do not have holdings that couldn't be liquidated at or near the last market prices. As such, in general, the closing price is a fair approximation as a basis for calculation. In addition, it is highly unlikely that everyone will run for the exit at the same time. For a larger player like Gates, et al., clearly his holdings could not be liquidated near the last market price. Some conservative investors might actually take a market-down to perceived 'liquidation value' if their holdings are of a size and the market lacks depth and liquidity. In short, the last price is a convenient and standarized method for calculation of portfolio value for most of us. If you have a better suggestion, please propose it..
 
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