I’m not Financeman so I have a basic finance question:
When people realize loss on stocks, where does that value go, does someone get it in zero sum fashion, or does it evaporate?
i.e. I buy 1 APPLE at $200 and it goes does to $170 and then I sell.
Conversely, where does money come from when I cash out on stocks that have increased in value?
If we just use the analogy of Pokemon cards, the ‘value’ is just someone who is willing to pay you for the cards. Stocks are the same as per my understanding. When the stock price falls from $200 to $170, it is just someone valuing the stock lesser than what you initially purchased it for. Your PSA 10 card is hot right now, but maybe in a month it may cool off and will be $30 lesser in value. The money has not gone anywhere, some is just not willing to pay the price you purchased it for, since there is no actual money in the card itself.
The actualy tangible money (dollar bills we can use to buy stuff) does not go anywhere, it is just transferred from the person you purchased the card / securities from. Same principle in selling for a profit. Someone else’s who is willing to pay more buys it from you so the actual money (tangible bills) are just transferred from them to you.
Cheers!
You’re not wrong, but the important difference is that a stock is an ownership share in a company. You are part owner of a company that is (supposedly) profitable and the stock value is (supposedly) based on potential future earnings of that company. It’s like owning a barrel of gasoline. There’s practical value to it.
Pokémon cards, on the other hand, have no practical value. Their value is based soley on what people think about them and their scarcity.
That is correct but the valuation still comes from speculation on how much money the stock / company can make for me in the future. I am no expert, but the line is a bit blurry to me.
The pokemon card was an analogy given the forum but even if we consider a barrel of gasoline, the price will fluctuate on a hour / day / month basis and it is dictated by what someone is willing to pay for the barrel. If I never sell the stock or the barrel of gasoline, there is no practical value on keeping it because if it goes to zero (hypothetically) I still get nothing.
I would rather say that I personally do not think Pokemon cards are a good investment choice since the speculation factor is more volatile, but the vlaue is still there.
Cheers!
Off the back of MrB’s explanation, a simplified example that might help visualise what happens to the money involved in buying and selling stocks:
Let’s say the current share price of Apple is $200.
Timmy Paperhands wants to buy a share at $200. They deposit $200 from their bank account to their choice of exchange (eg. Trading212, eToro, Robinhood etc). They then place a ‘buy order’ for 1 share. The exchange then matches that with someone (let’s say Chad McSellhigh) who has put up a sell order at $200, or thereabouts. There are thousands of buying and selling transactions happening at any given moment, so this match-up usually occurs pretty quickly.
Timmy now owns 1 share of Apple by paying $200, and Chad has received $200 for selling his share. Timmy hasn’t paid $200 directly to Chad as such, as their transactions are both facilitated by the exchange.
Now, let’s say the Apple share price tanks to $150/share the following week. This has happened because more of those transactions are sales than purchases, which pushes the price down. This might be due to a multitude of reasons, for example a quarterly sales target was not met for iPhones and therefore Apple investors lost faith in public demand for iPhones.
When he looks at his screen, Timmy Paperhands thinks, well gosh darn, he’s ‘lost’ $50, because he paid $200 for his share. In reality however, Timmy hasn’t actually lost or gained anything until he decides to sell that share. Because Timmy is a new trader and doesn’t know any better, he gets scared in case the share price sinks any lower, and decides to sell at $150. At that point of sale, Timmy has lost $50.
It just so happens, that Chad McSellhigh believes this lower share price of $150 presents a buying opportunity, and decides to buy a share. Since he sold his original share at $200 and just bought another at $150, he is now the proud owner of an Apple stock again, but also has an extra $50 in his bank account compared to before. Poor Timmy Paperhands on the other hand is down by $50. Overall, the same amount of dollars exist, but one person has ended up with more of them than the other.
That, on a very basic level, is an example of how wealth transfer can occur during the trading of stocks and shares. The same amount of money exists, it’s just that it’s changed hands via the means of buying and selling shares. This is also an example of why Rudy is often heard saying that market downturns are “where wealth is made”.
This answers my question, I was confused about what exactly the exchange is and what role it plays as an intermediary, seems like it’s mostly PvP, but I am curious about the nuances of the exchange
Was reading an article on US Fed rate cuts, and thought I’d post a few excerpts here as we just talked through a bit the other day:
Full article: Kashkari becomes latest Fed official to pour cold water on any near-term rate cuts
Excerpts:
“Minneapolis Federal Reserve president Neel Kashkari said Wednesday that the bar for cutting interest rates is “higher” right now to keep inflation expectations anchored in the face of tariffs — even if the economy weakens and job losses mount.”
“Federal Reserve Bank of San Francisco president Mary Daly on Tuesday said the central bank can take its time before making any adjustments to rates as it waits to see how trade policy changes play out.”
“Fed Chair Jerome Powell also made it clear last Friday that the Fed isn’t in a hurry to take any action on rates due to many uncertainties, saying, “It is too soon to say what will be the appropriate path for monetary policy.””
What worried me a bit was this:
"Market watchers and even President Trump are trying to pile more pressure on the Federal Reserve to consider a near-term interest rate cut or other interventions as the tariff market sell-off deepens.
Traders boosted their bets on the number of Fed cuts this year to five and pulled forward their estimate of when those cuts could begin, starting at the next meeting on May 6-7. The odds of a May cut are now nearly 60%."
End excerpts, enter Will, stage left:
If the Fed doesn’t see enough on the inflation side to cut rates, or even just wants to cut rates fewer than five times, it seems like the broader markets may get worse before they get better. That May Fed meeting will be a market mover.
Just in: 90 day pause on tariffs, markets going vertical. Imagine verticality will be limited considering China not among the pause-ees.
This whiplash is insane lol. PUTS got rektd
1st of all: Are we serious? This isn’t ok to keep pausing and resuming tariffs, especially if we’re dealing with countries that are seriously not taking a liking to us. Too many variables on the fly for companies to account for. Eventually not only will foregin companies and enterprises get sick of it, but American companies will too.
It dosen’t take much to know that this is not a sustainable idea for anyone, America included.
we are living in truly nutso times
In b4 Lol jk and markets tank again
Interestingly enough, bonds yields are still ticking up, they haven’t reacted as quickly as stocks. I don’t know enough about bond trading to know if that’s actually an independent reaction to the news, or if bond markets inherently can’t react as quickly.
These are truly “unpresidented” times….
Buying more Nvidia at the dip for $90 
Closed my short late yesterday, I doubt my long profit today will last overnight 
:
In my view this market isn’t really ‘safe’ until we close above 5775 S&P (200 SMA). We might gap up to 5400-5500 S&P.. but there could be one more dump if we get there is my expectation. Also, seeing pretty low volume on some of the moves, be careful out there. The things I do to buy more Pokemon cards, lol.
But you can put the gas in your car and use it. You can wield your influence as a part owner of a company to make it take some action (not practically for most stock owners but in theory). A collectible just sits on the shelf and looks pretty. Or even worse sits in a box hidden forever.
I could see the UK Government ISA concept that invests only in UK companies becoming a much more attractive proposal after all this mess.
Only issue is that the top 10 companies are outside of the UK, so you would miss out on a lot of exposure.
I am a brit, but live in Spain - sadly there are no ISA or similar products that allow you to invest anything meaningful annually that is tax exempt.
Kinda miss my UK ISA days 
It’s just the times we live in that this has gone from personal finance into a play-by-play of the current economic situation, which I don’t believe is ideal and may need to be reined in at some point soon.
Regardless, let’s stay away from politics and stick to discussing the consequences of the tariffs (not whether you believe they are justified, not whether they’re weaponized incompetence or the art of the deal, you get my point).
