The totally off-topic thread
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vetrade
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When I first read your quote it seemed innocuous enough, RAM, but on investigating its meaning I’m puzzled as to why you would think my reply to JohnK’s question was wrong.
His question was “I wish someone can explain to me where all the money goes when billions are wiped off the share market.” The context was the $20 billion “wiped off” share values yesterday.
My answer to him was factually correct yet, after apparently misunderstanding the context of the question, you referenced an obscure quote from a satirical show to imply otherwise, and then proceeded to regurgitate a plethora of random anecdotes about instances where people/ companies lost, or could lose, lots of money, each of which was, despite being true, unrelated or only marginally related to both the question and that context.
Certainly none of your anecdotes provided any evidence that my comments were incorrect. In fact, if anything, they were consistent with them. Common sense and logic prevail again!
As fate would have it, you couldn’t get a more timely confirmation of the accuracy of my comments than the fact that the market recouped all of yesterday’s losses, today. The $20B has been safely returned to the bottom line just like magic and JohnK and Plushka can sleep soundly tonight.
Edit: Sorry, had the wrong John. Fixed now. Thanks Flashback.
PS: Didn't see any headlines in the media "Stock market gains $20B today". They only like good news if it's a story about a puppy!
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Flashback
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When I first read your quote it seemed innocuous enough, RAM, but on investigating its meaning I’m puzzled as to why you would think my reply to JohnM’s question was wrong.
His question was “I wish someone can explain to me where all the money goes when billions are wiped off the share market.” The context was the $20 billion “wiped off” share values yesterday.
My answer to him was factually correct yet, after apparently misunderstanding the context of the question, you referenced an obscure quote from a satirical show to imply otherwise, and then proceeded to regurgitate a plethora of random anecdotes about instances where people/ companies lost, or could lose, lots of money, each of which was, despite being true, unrelated or only marginally related to both the question and that context.
Certainly none of your anecdotes provided any evidence that my comments were incorrect. In fact, if anything, they were consistent with them. Common sense and logic prevail again!
As fate would have it, you couldn’t get a more timely confirmation of the accuracy of my comments than the fact that the market recouped all of yesterday’s losses, today. The $20B has been safely returned to the bottom line just like magic and JohnM and Plushka can sleep soundly tonight.
JohnM or JohnK?
JohnK
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They always confuse us.JohnM or JohnK?
JohnM is the handsome one with the brains and all the money in case anyone is not sure. :mrgreen:
OATEK
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Interestingly focussed on F/J.
TheRealTMA
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And a enhanced liver enzymes through years of training as I believe?
JohnM
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:shock::shock::shock: ...cough, ...choke, ...gasp! It's all an honest mistake - I assure you!
.
JohnM
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And a enhanced liver enzymes through years of training as I believe?
Errr, I think JohnK could put me under the table quite easily
.
JohnK
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LOL! Only because you are softy drinking wine.Errr, I think JohnK could put me under the table quite easily
“News is what a chap who doesn't care much about anything wants to read.”
― Evelyn Waugh, Scoop
I did not say your answer was wrong, that's not what the quote means. BTW - the quote comes from a novel which subsequently made into a play.
What it meant is that you are correct up to a point but not totally correct in that for some people the impact is of experiencing a real wealth loss. Just like betting on a horse race - first past the post does have a real value impact to those who placed bets on the outcome of that race. For people who were not cashing in yesterday then (unless leveraged etc and required to make margin calls etc) it is just a normal fluctuation that the media and financial newsletter promoters like to publicise. Somewhat larger than the median daily fluctuation admittedly.
What you missed, in the examples I provided, is that anyone who redeemed or was paid out of a super fund, pension plan, had a margin call, used exchange traded options, redeemed from a unit trust - lost real money as their redemption request (for some pooled investment vehicle) put in yesterday would be processed as at the valuation at close of market yesterday. So they lost real money.
The second idea though is more important in that you go on to say that, "In most cases the shares will regain their value over a variable period of time so anyone who does not sell when the price falls will recover the value in time." This is where you are more wrong than right.
It is one of the most repeated un-truisms claimed by many financial planners, stock brokers and fund managers. Other times you will hear (frequently from Real Estate agents) that you can't go broke owning property or that prices never go down. Luckily in the last 5 years the availability of property market valuation series has reduced how often you hear that claim made.
In 1993 a just completed prime Collins St office tower was sold for 30% of its land valuation from 3 years earlier, the buyer got the new but totally empty building for free.
For example, the world's second largest equity market, by valuation at the time, in 1990 was Japan. The Nikkei Dow got close to 40,000 and today nearly 25 years from its peak it is at 17,148 - in nominal terms still down over 50% (and that's after the positive impact of survivorship bias).
Or German residential property is another example where nearly 20 years has seen it lose value after inflation and not keep pace with cash. Add in the holding costs of housing and it is even worse. But every dog has its day, like gold. From a large investor basis, adjusted for storage and insurance costs - gold was a near 30 year black hole.
In an earlier post I put some details about the 'survivorship' bias with market indices and gave the example of the All Ords from the 1987 and how when you left in the companies discarded from it, you were breaking even (so still suffering huge losses in time value of money terms) nearly 9 years later.
Share markets, when adjusted for inflation in the 1970s left investors worse off in inflation adjusted terms whereas some real assets as opposed to financial assets created increased inflation adjusted wealth.
Take a look at BHP's share price over a 35 year period, then adjust it for inflation. Both charts look quite sick. The same goes for many resource companies - they are leveraged plays on the business cycle - occasionally mucked up by mgmt in their timing (BHP has a track record of poor timing, UMAL, Manganese etc).
For twenty years a fund manager in Aust equities who did not invest in resource companies would have out-performed all but one other Australian manager. In risk adjusted returns it looked even better. Again the survivorship bias understates the out-performance (judged by looking solely at the indices) quite significantly given the number of mid size resource companies that went under.
In some cases there have been Australian companies that have provided strong, inflation adjusted, returns such as WBC and ANZ over the same 35 year period for example. CBA only appeared post-float in the 90s and NAB has been a big disappointment relatively since 1990.
Equally if you look at a Mkt leaders index, such as the Dow Jones, at 10 year rests you find that quite often more than half of the companies that were included in it at the start are no longer in it.
As some markets rebounded today (in index terms but not in foreign currency terms for some) some valuations increased today but all redemptions lodged yesterday missed out on today's rebound.
Finally, the value of the Australian share market ended lower today compared with Friday when measured in USD terms, Yen terms, Euro terms, GBP terms or effectively when viewed in non-Australian Dollar terms such as on a TWI basis or SDR basis.
Pull up a chart of the US market vs the Australian market in USD terms going back ten years - that is revealing.
The bulk of all goods purchased in Australia today come from overseas, so it is worthwhile keeping an eye on the effective buying power of one's Australian share market investments.
What happens to the value of Australian shares has more to do with China and the US than many of the companies' mgmt.
The earlier posting about the 100 Euro note joke is a good illustration of the domino effect.
Perceived value can disappear or equally appear depending on whim from day to day. That's the power of greed and fear! What is real is how the population as a whole feel by the 'apparent' loss of wealth or the repricing of it.
Same house in Oregon, same school district, same low crime rate neighbourhood - radically different valuation. What does not disappear anywhere near so easily is the leverage people have used to buy that asset. Such as we've seen with the mining service town housing boom and now bust.
― Evelyn Waugh, Scoop
I did not say your answer was wrong, that's not what the quote means. BTW - the quote comes from a novel which subsequently made into a play.
What it meant is that you are correct up to a point but not totally correct in that for some people the impact is of experiencing a real wealth loss. Just like betting on a horse race - first past the post does have a real value impact to those who placed bets on the outcome of that race. For people who were not cashing in yesterday then (unless leveraged etc and required to make margin calls etc) it is just a normal fluctuation that the media and financial newsletter promoters like to publicise. Somewhat larger than the median daily fluctuation admittedly.
What you missed, in the examples I provided, is that anyone who redeemed or was paid out of a super fund, pension plan, had a margin call, used exchange traded options, redeemed from a unit trust - lost real money as their redemption request (for some pooled investment vehicle) put in yesterday would be processed as at the valuation at close of market yesterday. So they lost real money.
The second idea though is more important in that you go on to say that, "In most cases the shares will regain their value over a variable period of time so anyone who does not sell when the price falls will recover the value in time." This is where you are more wrong than right.
It is one of the most repeated un-truisms claimed by many financial planners, stock brokers and fund managers. Other times you will hear (frequently from Real Estate agents) that you can't go broke owning property or that prices never go down. Luckily in the last 5 years the availability of property market valuation series has reduced how often you hear that claim made.
In 1993 a just completed prime Collins St office tower was sold for 30% of its land valuation from 3 years earlier, the buyer got the new but totally empty building for free.
For example, the world's second largest equity market, by valuation at the time, in 1990 was Japan. The Nikkei Dow got close to 40,000 and today nearly 25 years from its peak it is at 17,148 - in nominal terms still down over 50% (and that's after the positive impact of survivorship bias).
Or German residential property is another example where nearly 20 years has seen it lose value after inflation and not keep pace with cash. Add in the holding costs of housing and it is even worse. But every dog has its day, like gold. From a large investor basis, adjusted for storage and insurance costs - gold was a near 30 year black hole.
In an earlier post I put some details about the 'survivorship' bias with market indices and gave the example of the All Ords from the 1987 and how when you left in the companies discarded from it, you were breaking even (so still suffering huge losses in time value of money terms) nearly 9 years later.
Share markets, when adjusted for inflation in the 1970s left investors worse off in inflation adjusted terms whereas some real assets as opposed to financial assets created increased inflation adjusted wealth.
Take a look at BHP's share price over a 35 year period, then adjust it for inflation. Both charts look quite sick. The same goes for many resource companies - they are leveraged plays on the business cycle - occasionally mucked up by mgmt in their timing (BHP has a track record of poor timing, UMAL, Manganese etc).
For twenty years a fund manager in Aust equities who did not invest in resource companies would have out-performed all but one other Australian manager. In risk adjusted returns it looked even better. Again the survivorship bias understates the out-performance (judged by looking solely at the indices) quite significantly given the number of mid size resource companies that went under.
In some cases there have been Australian companies that have provided strong, inflation adjusted, returns such as WBC and ANZ over the same 35 year period for example. CBA only appeared post-float in the 90s and NAB has been a big disappointment relatively since 1990.
Equally if you look at a Mkt leaders index, such as the Dow Jones, at 10 year rests you find that quite often more than half of the companies that were included in it at the start are no longer in it.
As some markets rebounded today (in index terms but not in foreign currency terms for some) some valuations increased today but all redemptions lodged yesterday missed out on today's rebound.
Finally, the value of the Australian share market ended lower today compared with Friday when measured in USD terms, Yen terms, Euro terms, GBP terms or effectively when viewed in non-Australian Dollar terms such as on a TWI basis or SDR basis.
Pull up a chart of the US market vs the Australian market in USD terms going back ten years - that is revealing.
The bulk of all goods purchased in Australia today come from overseas, so it is worthwhile keeping an eye on the effective buying power of one's Australian share market investments.
What happens to the value of Australian shares has more to do with China and the US than many of the companies' mgmt.
The earlier posting about the 100 Euro note joke is a good illustration of the domino effect.
Perceived value can disappear or equally appear depending on whim from day to day. That's the power of greed and fear! What is real is how the population as a whole feel by the 'apparent' loss of wealth or the repricing of it.
Same house in Oregon, same school district, same low crime rate neighbourhood - radically different valuation. What does not disappear anywhere near so easily is the leverage people have used to buy that asset. Such as we've seen with the mining service town housing boom and now bust.
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whatmeworry
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vetrade
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Quote - RAM: “I did not say your answer was wrong, that's not what the quote means.”
So you’re using Tinkerbell’s interpretation then? :-
From PoliticsInVivo.com:
In Evelyn Waugh’s hilarious journalism satire Scoop, the obsequious editor Mr. Salter is so terrified of his newspaper-magnate boss, Lord Copper, that he can’t bring himself to say “yes” or “no” to him. Instead, when Lord Copper is right, he answers “Definitely, Lord Copper” and when he’s wrong, it’s “Up to a point, Lord Copper.”
Quote – RAM: “What it meant is that you are correct up to a point but not totally correct in that for some people the impact is of experiencing a real wealth loss………. For people who were not cashing in yesterday then ……….it is just a normal fluctuation.”
So bugg^r me, some people lose money (“real wealth loss”) in the stock market if they sell, or are forced to sell due to a margin call etc., when the market drops. Who would have thought that? So far I think I am totally correct RAM, and, reluctantly or not, it seems you can’t avoid agreeing with me. As you say, the people who didn’t sell yesterday only experienced a “normal fluctuation”.
Quote – RAM: “What you missed, in the examples I provided, is that anyone who redeemed or was paid out of a ……………….. lost real money as their redemption request ……………put in yesterday would be processed as at the valuation at close of market yesterday. So they lost real money.”
Didn’t miss that point at all – apart from the obvious caveat that people who sold yesterday may have made (not lost) real money if they bought at prices lower than yesterday’s close (please don’t take that as a cue to start on about time value of money etc.), it’s no mystery that some people would also have lost (in all markets some people win, some lose and some break-even).
Where you missed the point is that those (realised) losses (or gains) only make up a small proportion of the $20B supposedly “wiped off” the stock market on Monday. The vast majority of that $20B figure comes from the artificial re-valuation of the whole market based on the prices at which at a comparatively small proportion of shares changed hands that day. They were not realised losses. Since I was never trying to write a dissertation on all the vagaries of the market what is the problem about making a “big picture” comment?
Quote - RAM: “The second idea though is more important in that you go on to say that, "In most cases the shares will regain their value over a variable period of time so anyone who does not sell when the price falls will recover the value in time." This is where you are more wrong than right.”
Apart from the obvious fact that this contradicts your own previous comment that “For people who were not cashing in yesterday then ……….it is just a normal fluctuation”, (no, you can’t have it both ways) you apparently completely overlook that the discussion was about a one day dip in the Australian STOCK MARKET when you try to prove I was “more wrong than right” with this stuff:
Seriously RAM, did you even read my post properly? Real estate prices in Collins St and Germany? Relevance of your examples: NIL – you’re referencing pumpkins but the discussion was about apples. You gotta eat more fruit, RAM!
Quote - RAM: “Perceived value can disappear or equally appear depending on whim from day to day. That's the power of greed and fear!”
Took you a page of waffle to get there but you made it! Can you now see that your “perceived value” and my phrase “paper losses” are, for all practical purposes, interchangeable?
And on it goes – you certainly have an extensive repertoire of stories but very few people other than yourself would consider them relevant given the CONTEXT of the original discussion.
So you’re using Tinkerbell’s interpretation then? :-
From PoliticsInVivo.com:
In Evelyn Waugh’s hilarious journalism satire Scoop, the obsequious editor Mr. Salter is so terrified of his newspaper-magnate boss, Lord Copper, that he can’t bring himself to say “yes” or “no” to him. Instead, when Lord Copper is right, he answers “Definitely, Lord Copper” and when he’s wrong, it’s “Up to a point, Lord Copper.”
Quote – RAM: “What it meant is that you are correct up to a point but not totally correct in that for some people the impact is of experiencing a real wealth loss………. For people who were not cashing in yesterday then ……….it is just a normal fluctuation.”
So bugg^r me, some people lose money (“real wealth loss”) in the stock market if they sell, or are forced to sell due to a margin call etc., when the market drops. Who would have thought that? So far I think I am totally correct RAM, and, reluctantly or not, it seems you can’t avoid agreeing with me. As you say, the people who didn’t sell yesterday only experienced a “normal fluctuation”.
Quote – RAM: “What you missed, in the examples I provided, is that anyone who redeemed or was paid out of a ……………….. lost real money as their redemption request ……………put in yesterday would be processed as at the valuation at close of market yesterday. So they lost real money.”
Didn’t miss that point at all – apart from the obvious caveat that people who sold yesterday may have made (not lost) real money if they bought at prices lower than yesterday’s close (please don’t take that as a cue to start on about time value of money etc.), it’s no mystery that some people would also have lost (in all markets some people win, some lose and some break-even).
Where you missed the point is that those (realised) losses (or gains) only make up a small proportion of the $20B supposedly “wiped off” the stock market on Monday. The vast majority of that $20B figure comes from the artificial re-valuation of the whole market based on the prices at which at a comparatively small proportion of shares changed hands that day. They were not realised losses. Since I was never trying to write a dissertation on all the vagaries of the market what is the problem about making a “big picture” comment?
Quote - RAM: “The second idea though is more important in that you go on to say that, "In most cases the shares will regain their value over a variable period of time so anyone who does not sell when the price falls will recover the value in time." This is where you are more wrong than right.”
Apart from the obvious fact that this contradicts your own previous comment that “For people who were not cashing in yesterday then ……….it is just a normal fluctuation”, (no, you can’t have it both ways) you apparently completely overlook that the discussion was about a one day dip in the Australian STOCK MARKET when you try to prove I was “more wrong than right” with this stuff:
- Real estate agents have said “you can’t go broke owning property”
- A Collins St office tower sold at a big loss in 1993
- The Japanese Nikkei fell in 1990 and
- The German property market suffered losses 20 years ago.
Seriously RAM, did you even read my post properly? Real estate prices in Collins St and Germany? Relevance of your examples: NIL – you’re referencing pumpkins but the discussion was about apples. You gotta eat more fruit, RAM!
Quote - RAM: “Perceived value can disappear or equally appear depending on whim from day to day. That's the power of greed and fear!”
Took you a page of waffle to get there but you made it! Can you now see that your “perceived value” and my phrase “paper losses” are, for all practical purposes, interchangeable?
And on it goes – you certainly have an extensive repertoire of stories but very few people other than yourself would consider them relevant given the CONTEXT of the original discussion.
Just don't ask him about the gradient of the tangent.
vetrade
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Ha ha - I'm not touching maths questions!
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rainbowgirl
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We kicked out the maths questions into another thread. Are there other topics we should kick out into other threads as well? I'm not actually reading the economics/value of shares posts at the moment and just skimming through them.
vetrade
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It's inevitable that not all topics are of interest to everyone, rainbowgirl. It goes with the territory in a tread titled "The totally off-topic thread".
Personally I find that nearly all topics run their course and fade away as something new get's commented on. I'm a skimmer too and can readily ignore this thread for weeks at a time but when I have too much time on my hands I can't resist a look to see what the topic du jour is.
Just COS.......
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