Aug 25, 2015

Stocks: hold ’em, fold ’em, walk away or run?

The sharemarket has lost billions. But where does that money come from? And where did it go? And was it even real money to begin with? Economist and freelance journalist Jason Murphy explains.

Global sharemarkets are a vibrant scarlet on Tuesday morning as investors around the world sell their stocks to a group of buyers making smaller and smaller bids. The headlines shout about a wipe-out of billions, or even trillions in value. The ASX fell 4% on Monday, and Shanghai fell 8%. Wall Street fell 4% last night, the Nikkei 4.6%, London’s index 4.7%. Tuesday’s trade is in session, and it seems a small share of the losses has been recouped already. But what does it mean to the real-life share investor?

Those lost billions are paper losses. They compare the hypothetical cash value of the sharemarket before and after the day’s trade. Paper losses count most when they are realised — you can be behind when you’re playing blackjack, but all that really matters is your holdings when you walk out of the casino.

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4 thoughts on “Stocks: hold ’em, fold ’em, walk away or run?

  1. Jaybuoy

    The big chink in capitalisms armour..

  2. AR

    Interesting the way the big players counsel ‘ordinary stockholders’ to remain calm and not sell whilst they do they exact opposite.
    Gotta have some dumbo to fleece.

  3. David Hand

    It’s a real problem if you are a margin trader and this is a market strategy financial advisers have been known to push. With margin trading, your lender could force you to make today’s values real. We could well see stories begin to emerge of ordinary investors wiped out by these falls.

    I also think we’ve seen a lot of computer driven trading to stop losses. If this is so, prices should rise again quite quickly provided not many have been wiped out.

  4. ken svay

    The oldies still get their divvies, unless they sell they havent lost anything. I sold a big chunk of TLS last week, I doubled my money since the GFC and got the divvies. Now to buy into cheaper stocks that will give me capital gain and wait for Joes pension so I can lie on the beach in Cambodia and wait to die.

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