Saturday, October 25, 2008

Transports, Tsumani's, Tide Charts and Balanced Equations

As I left today for my dog transport, I saw one of the prettiest rainbows I've seen in a long time. Market shamanism? Will we get a reprieve from this constant barrage of mini world market stock crashes? Whose to know? But it sure is a nice thought.

Here are some pics from today's crew. Herbert is the Yoda-looking fellow. He was a very nice shotgun passenger. It was important to him to be next to me as close as the console allowed. The next two dogs were very nice. The husky/shephard was a male and he rode in another vehicle with Thora, a rottie mix. Thora was a very strong dog. The maltese was in a crate in my backseat along with Fabio. His picture was not available on pet finders. He was a lovely retriever/lab mix--with long black silky fur.

The final dog is Mattie--is she not a cutie pie? She was young and in a crate.
I drove from Richmond to Springfield. It is about an 90 minute drive. With the summer driving season behind us, the northern corridor of 95 is much more manageable. All dogs slept. Not a peep! In fact, I've never had a drive where dogs have whined/barked uncontrollably for long periods of time. Thank goodness. I never did well with whiney babies either.

Last evening, I filled out an application to get Lacey. Lacey is in Sylva, NC. According to the Google map that is 428 miles from my home. That is about a 7 hr drive give or take. She was rescued from a kill shelter. They get 7 days, and then their time is up. Animal rescue groups, to include breed-specific rescues, often keep tabs on these animals. Lacey, though clearly an English Setter, did not get picked up by a breed-specific rescue, but rather from a local rescue group. You'd be surprised about the number of private individuals that open their homes and their hearts to foster animals until a permanent home can be found.

I listened to Financial Sense Online today. Frank Barbera was on. I like him and Tim Woods alot. He's looking for a massive rally soon. But the market has been confounding on a daily basis, and seems to not want to behave. I don't think that technicals mean much when we are undergoing massive deleveraging. Sort of like tide charts in the midst of a tsunami--do the tide charts really matter? I would say no.

I'm still of the mind that we are in for a protracted period of difficulties. As I was driving today, I wondered about the plus side that balances the minus of this equation. Money does not evaporate. For every loss; there is a gain. I didn't get very far with that musing.


Anonymous said...

"For every loss; there is a gain."

I do not believe that is correct.

If a $1,000,000 house has lost 25% of its value it is lost. If it is sold, the new purchaser owns a $750,000 house (not a $1,000,000 house). The assumption that it remains a $1,000,000 house is flawed because it is based on the dubious logic that in the long term house prices always rise. In fact, it may be worth only $500,000 in a few months. Moreover, by the time house prices begin to rise again this house might not participate if prices will be based on affordability.

Anonymous said...

Lessmore- that logic holds only if it 'became' a $1m house on paper (eg, on a comparison basis, or maybe on Zillow)...if it was actually sold at one point for $1m, then someone (and associated parties in the transaction) pocketed the money, so at least one party did record a gain...

(of course, people talking about owning a million-dollar house because a similar home in the neighborhood sold for $1m are perfectly entitled to those bragging rights, but any loss or gain associated with that occurs only in their heads)...


nice said...

I agree with Lessmore

Not everything is zero sum.
And wealth destruction is a real phenomenon.

Stocks are not a zero sum game
because at any given time there are always tons more people long stocks versus a relatively small percentage short.

Hence capital can just be wiped out as stock prices drop - with more losing than winning.

Also IMO it is good to keep in mind that the stock market has a 'dual personality' when it comes to the bidding/asking of equity prices.

Depending on the market conditions, sometimes the market acts like an auction:
During these times, as prices rise - more people want in - and bid up prices (like an art auction).

In other cases the stock market acts more like a department store - more like supply/demand - so if there are too many stocks and few willing buyers - the department store (sellers) has to lower prices to bring in buyers.
This can feed on itself.

In certain extreme conditions - the department store goes out of business - and everything goes on a 'firesale' - and we revert back to an auction where people bid for what no one wants - but in this case the bids are 'stink bids'


As for real estate - prices can often be 'sticky' - so a few at the top or bottom of the market may benefit if they timed it right - but if prices just start dropping and people are still sitting in their homes - then wealth is just destroyed - and there is not another side that wins in this case.


For Options though, since options are a 'contract' we have both a buyer and a seller of that same said contract - so one can say in this case it is zero sum.


The question of the day is:
Are Derivatives a zero sum game - AS FAR AS THE ECONOMY IS CONCERNED???

Pray that they are.


Anonymous said...

'nice' to see you're back...

and then, of course, there is destruction of wealth via inflation, as well of destruction of livelihoods via destruction of the games people play as adults often don't change, nor the effect on the lives of those destroyed by those 'games'...


Leisa said...

I suppose that is why we have realized and unrealized losses--and I was not considering the effect of unrealized losses when I penned my statement. I did at least qualify that I hadn't thought too much about it!

I was thinking solely about transacted gains, but for those souls still clutching their shares in the fire sales, there is real wealth destruction there. So, I retract my statement and say that it is a zero sum game. Thanks for pointing out the flaw in my comment.