tag:blogger.com,1999:blog-35316766.post2864505031913064588..comments2023-11-03T09:17:54.879-04:00Comments on The Perplexed Investor: Transports, Tsumani's, Tide Charts and Balanced EquationsLeisa♠http://www.blogger.com/profile/10237875938400587600noreply@blogger.comBlogger5125tag:blogger.com,1999:blog-35316766.post-27992593689240385022008-10-26T16:38:00.000-04:002008-10-26T16:38:00.000-04:00I suppose that is why we have realized and unreali...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!<BR/><BR/>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.Leisa♠https://www.blogger.com/profile/10237875938400587600noreply@blogger.comtag:blogger.com,1999:blog-35316766.post-8902481990110304332008-10-26T12:35:00.000-04:002008-10-26T12:35:00.000-04:00'nice' to see you're back...and then, of course, t...'nice' to see you're back...<BR/><BR/>and then, of course, there is destruction of wealth via inflation, as well of destruction of livelihoods via destruction of wealth...so the games people play as adults often don't change, nor the effect on the lives of those destroyed by those 'games'...<BR/><BR/>2ndAnonymousnoreply@blogger.comtag:blogger.com,1999:blog-35316766.post-42984426605949921682008-10-26T12:13:00.000-04:002008-10-26T12:13:00.000-04:00I agree with LessmoreNot everything is zero sum.An...I agree with Lessmore<BR/><BR/>Not everything is zero sum.<BR/>And wealth destruction is a real phenomenon.<BR/><BR/>Stocks are not a zero sum game<BR/>because at any given time there are always tons more people long stocks versus a relatively small percentage short.<BR/><BR/>Hence capital can just be wiped out as stock prices drop - with more losing than winning.<BR/><BR/>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.<BR/><BR/>Depending on the market conditions, sometimes the market acts like an auction:<BR/>During these times, as prices rise - more people want in - and bid up prices (like an art auction).<BR/><BR/>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.<BR/>This can feed on itself.<BR/><BR/>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' <BR/><BR/>..<BR/><BR/>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.<BR/><BR/>..<BR/><BR/>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.<BR/><BR/>--<BR/><BR/>The question of the day is:<BR/>Are Derivatives a zero sum game - AS FAR AS THE ECONOMY IS CONCERNED???<BR/><BR/>Pray that they are.<BR/><BR/>niceAnonymousnoreply@blogger.comtag:blogger.com,1999:blog-35316766.post-18961437336751990562008-10-26T11:56:00.000-04:002008-10-26T11:56:00.000-04:00Lessmore- that logic holds only if it 'became' a $...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...<BR/><BR/>(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)...<BR/><BR/>2ndAnonymousnoreply@blogger.comtag:blogger.com,1999:blog-35316766.post-83297425979938120302008-10-26T11:14:00.000-04:002008-10-26T11:14:00.000-04:00"For every loss; there is a gain."I do not believe..."For every loss; there is a gain."<BR/><BR/>I do not believe that is correct. <BR/><BR/>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.<BR/>LessmoreAnonymousnoreply@blogger.com