Tuesday, October 14, 2008

So Who Does Make Money in a Market Downturn?

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When stocks are sold, the money doesn't disappear. It is then in the hands of the seller. If the seller bought it some time ago, or arranged for a short sale yesterday, even if the stock as gone down from its high, (only if it has gone down from its high in a short sale) the seller makes money.

The people who lose money are those that buy at or near the high of the market, as true buys, not short sales, and hang onto the stock as it slides below where they bought it, until finally they do sell it, "at a loss" to themselves. Their loss provides a gain to the seller who sold it to them, from the paragraph above.

My guess is that getting the timing right for personal gain, is probably 25% blind luck, and 75% economic smarts. I would also guess that 95% of the time the wins go to folks AT THE HIGHER ENDS of the economic scale, where they can have access and time to learn the ins and outs of the marketplace, or pay someone who does.

Of course, if the market tanks so badly that nobody thinks anybody can make any money, then we all wind up having the government (us, our social security, grandchildrens; taxes) bail out the rich banks to get the markets happy again, so that we all stayed employed and our businesses can remain open.

Congress could have chosen to prime the pump from the bottom, giving all the consumers tons of money and limiting the interest rates on mortgages and credit cards to say 14% max, but no new purchases via credit cards till the balance is $0, and no fees above $10/month, all inclusive, but they didn't.

The rich keep on getting richer, with this kind of bailout, and eventually the country will fall apart.

Somehow I just don't think the current band-aid is going to do much for the cut to the carotid artery. Somewhere along the line an evil Bugs Bunny is going to jump up and say, "What's Up, Doc?"

We really need to retrain and retool this country in earnest, and go solar nuclear ASAP. We have 306,000,000 Americans with 50,000,000 civilian guns. We can take care of any terrorists who might get in easily. We've been playing fraidycat. Time to stop the war and fix America.

1 comment:

Anna Haynes said...

Yo, Keachie, you there?
I could use your eyes for a minute, over at my blog.