I've lost money

[GNEP]

I'm with Umf here - shirley money's just a measure of wealth anyway?

Doc - what if you'd sold what you had post 9/11 and bought different assets to make up your portfolio? Would you have been better off than you are now or worse? Does it matter? Because hindsight makes any discussion like this moot...

[cjolley]

But, that's like saying that if you put money in a slot machine and then watch the person next to you pull thier handle, that you lose if they do.
If they loose does that mean that you have too?
You have the same amount in the game untill you pull the handle.

Alternatively, look at the way this is treated for tax purposes.
Brian E. can't charge off his loss or pay tax on his gain untill he actualy sells.
Why? Because nothing has realy happened yet.
chuck

[GNEP]

Don't quite get your first analogy chuck

But the tax - chargeable losses can be VERY useful so a good time to shuffle assets around might well be during a dip in the market, if you are investing for the long term...

[Dr Mordrid]

Originally posted by GNEP
Doc - what if you'd sold what you had post 9/11 and bought different assets to make up your portfolio? Would you have been better off than you are now or worse? Does it matter? Because hindsight makes any discussion like this moot...

With 20/20 hindsight I may have done better, but as it is my investments dropped about 30% after 9/11 but are up almost 50% since March and still going. I'm happy with that

Dr. Mordrid

[cjolley]

Originally posted by GNEP
Don't quite get your first analogy chuck

But the tax - chargeable losses can be VERY useful so a good time to shuffle assets around might well be during a dip in the market, if you are investing for the long term...

As to the first analogy, Brian is watching other people buy and sell and using that to predict what would happen if he sold.
If he does not sell now, he can predict reliably that, at least for now, he will not suffer a similar fate.

As to the second, the point is that untill he actualy sells, for what ever reason, nothing has actualy happened and it's treated as such for tax purposes.
Chuck

[Umfriend]

Both money and equities, as CD, T-Bills and Bonds are means to store wealth, and in that sense interchangeable. Look at it this way.
1. You buy a stock at 100
2. It drops to 80.

You have lost no money, *right*?
Now sell it at 80, and buy it back at 80.

You still have that one stock, but now you have "lost" money because you sold it?

Oh, and on taxes, look at how banks or proffesional investors are taxed..... Indeed, on a "Mark-to-Market" basis. It is just "unfiar" to tax private citisens forcing them to sell part of their equities to be able to pay the taxes on the capital gains....

[cjolley]

Originally posted by Umfriend

1. You buy a stock at 100
2. It drops to 80.

You have lost no money, *right*?
Now sell it at 80, and buy it back at 80.

You still have that one stock, but now you have "lost" money because you sold it?
...

Maybe your broker will sell and buy stocks for you for free, but mine won't.

Seriously though, your transactions are a wash, nothing has changed.

Possibly I just inhabit too low a financial strata, but I've never heard of having to pay tax, or write off* on merely theoretical capitol gains and losses.

Give up guys, Doc and I agree on this. That should tell you something
chuck

[edit]
*Could you take that "loss" as a writeoff?
[/edit]

[Umfriend]

GIVE UP???? NEVER!!!!!
Try this then:
1. You buy a stock at 100
2. It drops to 80.
3. Sell it at 80
4. It drops to 79
5. You buy it at 79.
6. It rises to 80.

Someone else just does step 1, at step 6, that equity is worth 80. This guy however, has the same equity and 1 dollar (he sold at 80, and bought at 79)

If we can at least agree taht the financial situation of both differ with $1 in cash only, we can then look how to describe what has happened to them both in such a way that the same methodology works for both.

Saying person B did not lose money because he.she did not sell, and that perosn A lost 20 because he bought at 100 and sold at 80 does not help, does it? Then the difference in net worth (or net value) would have to be 20, which is not the case, it is only 1.
Everybody with me so far?

Oh, chuck, yes, banks would that loss of 20 from their P&L and thus *save* corporate taxes.

[cjolley]

But those examples involve selling the stock at some point.
If you do not sell, nothing has happened.

Think of it this way:
The stock market consistes of offers to buy and sell.
Suppose I buy a stock at 100.
If someone offers to buy it from me at 80
and someone else offers to buy it from me at 120,
is that a wash?
If I don't sell, then in some wierd way I suppose it is.
Otherwise it just depends on who I deside to sell it to.

The price of the stock is just an offer, not a transaction.
If you don't sell, nothing has happened.

Better yet, what's to prevent me from telling a bank that I will buy thier $100 stock for 0.01 and sell it back to them the same day at $50?
I make $50/share and and they get a $50 write off, all for free.


chuck

[Umfriend]

Chuck, the second example involves one selling and another holding (=not selling). As they both arrive at very similar situations, i.e. they own an equity they bought at the same price, and have they same amount of cash (in the second example a $1 difference only), they try to asses whether it makes sense to say that one can only suffer a loss when one sells. How can two people end up with the same portfolio of equities and cash, and yet one suffered a loss and the other did not? Maybe we should redefine?

Oh, and if the bank pays corporate taxes at say 30%, than they would only benefit $15 vis-a-vis the IRS, but lose $50 to you. Still a negative game for them at -$35.

[cjolley]

Try this then:
1. You and a friend buy the same amount of stock at 100
2. It rises to 120
3. He sells, you don't
4. It falls back to $100

Have you lost money?
Why not?
You started out with the same amount and now you have less than he does.

The fact is that no transactions have transpired on your account.
Nothing has changed for you except that your friend will pay for the drinks tonight.
chuck

[cjolley]

Originally posted by Umfriend
Chuck, the second example involves one selling and another holding (=not selling). As they both arrive at very similar situations, i.e. they own an equity they bought at the same price, and have they same amount of cash (in the second example a $1 difference only), they try to asses whether it makes sense to say that one can only suffer a loss when one sells. How can two people end up with the same portfolio of equities and cash, and yet one suffered a loss and the other did not? Maybe we should redefine?

Oh, and if the bank pays corporate taxes at say 30%, than they would only benefit $15 vis-a-vis the IRS, but lose $50 to you. Still a negative game for them at -$35.

But, they get the equity back and as far as the rest of the world is conserned it still has the same value.

chuck

PS There are probably people sitting in jail e'n as we speak for some obfuscated version of this.

[Umfriend]

Your example is excellent chuck. Yes, we both make a profit, we earn money and $20 at that! The other guy changes his position, he stores his value in cash, in real dollars, the most liquid storage available, whereas I keep the equity. It drops back to $100, by which I lose $20. At the ned of the day, I first gained and then lost 20$. The other guy gained 20$. (And I still hate him for it).

[Umfriend]

On the scam, what stock do you buy? The banks' own stock to be newly issued, i.e. are they creating more equities? What is the market value of these equities. Same question if it's equities in another firm your bank owns. It doesn't work either way, but I'd like to know where you are coming from to show exactly.

[GNEP]

Chuck - you're second example: he has gained, you have not lost... but measured at the time the shares were 120 - you have both gained, but he has liquidated his gains.

Re: your example of the market being just buying and selling - one of the fundamental assumptions you have to make (because it is, by and large, true - in simple terms due to the presence of market makers) is that of no arbitrage - that is at any one time you cannot instantaneously buy low and sell high for an instant, risk-free profit.

Now answer me this question honestly:
At a given point in time you have some shares in company A. It doesn't matter what you bought them for. You have no definite intention to sell some or all of what you have or to buy more - but these options are always available. Other shares do exist in the market.

Do have an economic preference for being in the situation of:
A) Share A being worth 99
B) Share A being worth 101
C) Niether A or B (ie you don't give a fig)

(I would prefer B if you hadn't guessed)