Author Topic: Did anyone else just laugh yesterday when the market dropped?  (Read 6624 times)

Alchemisst

  • 5 O'Clock Shadow
  • *
  • Posts: 76
Re: Did anyone else just laugh yesterday when the market dropped?
« Reply #50 on: August 13, 2019, 11:48:39 PM »

The U.S as well as others, why only look at the U.S?
Depends what kind of sideways, what I meant was 30 years of 0 returns can and has happened, a well as 30 years to get back above a previous peak
Not in the US market as far as I know.  Japan maybe?  What market and time period are you thinking of?

GuitarStv

  • Senior Mustachian
  • ********
  • Posts: 13757
  • Age: 38
  • Location: Toronto, Ontario, Canada
Re: Did anyone else just laugh yesterday when the market dropped?
« Reply #51 on: August 14, 2019, 08:07:24 AM »
I don't laugh at losing $45k.
It's going to happen along the bumpy road and I expect it, but nothing to laugh about.
I'm full invested so, a market drop is not a chance to get money in cheap.
 There are people that are really hurt by such a thing.

You only lost 45k if you sold.  Otherwise, you've lost nothing.

I'm always mystified by these comments-- "you only lost if if you sold and locked in that loss" or "it's only paper losses".   Try going to your banker and explaining, "yes I know yesterday I had 50K and now my account shows its down 45K...but, really I haven't lost anything because it's just a paper loss."  See how that goes over.

By that logic, when your account goes up 45K because the market rises---then you can't really count that as an increase in your wealth or net worth because you haven't sold it and locked in that gain.

Yes.  That is correct.  Until you sell you don't have a gain or loss.  You have a bunch of stocks.  When you convert the stocks into money, then you experience a gain or loss.



Losses are losses when the market closes....and gains are gains....you can't have it both ways. Pretending otherwise is silly.

No.  Losses and gains are all theoretical until you have the money in your hand.  When you have invested in a stock, the only real thing that you have is the stock.  You haven't invested 10,000$ of stock, you have invested in x number of stock.  The value of the stock isn't static . . . so it's ridiculous to say that you've gained 3% one day and lost 3% the next.  You haven't gained or lost anything.  You still have the same thing . . . the stock.  The market might give you more or less money for it depending on it's whims.  You haven't gained or lost anything until you sell though.

This is why you're not taxed on gain/loss until you sell.



I agree with the poster that losses in the market do hurt people, especially those close to retirement. It's not something to be taken lightly or laugh about. But with ten years of gains in the rearview since the last recession, its easy to think the market is predictable and infallible. It's asset speculation...but if you wanna call it investing....go head and do that too.

Losses in the market hurt people only when people have to sell.  Then they lock in their losses.  That's why it's a good idea to hold investments that are more stable than stocks so that you can sell these for a few years if necessary due to drops in prices to avoid losing money.  If you don't need to take money out and lock in a loss, then market fluctuations shouldn't matter to you at all.

habaneroNorway

  • Stubble
  • **
  • Posts: 221
Re: Did anyone else just laugh yesterday when the market dropped?
« Reply #52 on: August 14, 2019, 08:17:34 AM »
Losses are losses when the market closes....and gains are gains....you can't have it both ways. Pretending otherwise is silly.

It's a mark-to-market loss. Which only affect the number of dollars you would get if you sold. It's different if you trade on a margin account (common in the futures market) then the profit and loss is settled daily. Its like you close out the position at the end of every trading day and then reopen it the next. If you don't have more margin in your account you either have to put in more or your broker closes the position and comes after you for any residual loss.

In equities or ETF or mutual funds you never make or loose money until you sell. (You make some if you receive coupons/dividend payments while holding). What happens in the meantime is that the price at which you cold have sold (or bought more) fluctuates. This is one of the reasons why leveraging is so risky - your bank might force you to sell when you don't want to.

The outlier is if you own single stock and the company goes bankrupt. Then your stock is worthless even if you never actually sold it or intended to. You have then lost the sum you bought for less any dividends received while holding it.

Dabnasty

  • Handlebar Stache
  • *****
  • Posts: 1818
Re: Did anyone else just laugh yesterday when the market dropped?
« Reply #53 on: August 14, 2019, 08:49:14 AM »
I don't laugh at losing $45k.
It's going to happen along the bumpy road and I expect it, but nothing to laugh about.
I'm full invested so, a market drop is not a chance to get money in cheap.
 There are people that are really hurt by such a thing.

You only lost 45k if you sold.  Otherwise, you've lost nothing.

I'm always mystified by these comments-- "you only lost if if you sold and locked in that loss" or "it's only paper losses".   Try going to your banker and explaining, "yes I know yesterday I had 50K and now my account shows its down 45K...but, really I haven't lost anything because it's just a paper loss."  See how that goes over.

Others have already given good explanations but I want to respond to just this portion. When people say "paper losses" they don't mean because it's a number on paper or on a screen, they're saying that it's the value of an asset as opposed to real dollars. Your bank account shows a number that represents real dollars. Your brokerage account shows a number that represents the present value of an asset.

Villanelle

  • Magnum Stache
  • ******
  • Posts: 2814
Re: Did anyone else just laugh yesterday when the market dropped?
« Reply #54 on: August 14, 2019, 10:00:55 AM »
If the fair market value of my house goes down 10%, I don't say "I've lost $60,000 on my house this year".  And if it goes up, I don't say, "I made $60k on my house this year."  Because I still have exactly what I had before--a house. And that's how most people look at it.

But suddenly when it comes to equities, people get squirrelly and want to count a change in value as a loss in a way they wouldn't with a home, car, or other things they own.  But the same principle applies.  You have what you had the day before.  When you sell, then you have something different, and that's when it makes sense co calculate what you've gained or lost.

You are correct that people can't really have it both ways.  It's equally silly to say you made 4% on your mutual funds today than it is to say you lost 4% (or $40k) if you aren't actually making any transactions that lock in those prices.   

Dabnasty

  • Handlebar Stache
  • *****
  • Posts: 1818
Re: Did anyone else just laugh yesterday when the market dropped?
« Reply #55 on: August 14, 2019, 10:11:14 AM »
If the fair market value of my house goes down 10%, I don't say "I've lost $60,000 on my house this year".  And if it goes up, I don't say, "I made $60k on my house this year."  Because I still have exactly what I had before--a house. And that's how most people look at it.

But suddenly when it comes to equities, people get squirrelly and want to count a change in value as a loss in a way they wouldn't with a home, car, or other things they own.  But the same principle applies.  You have what you had the day before.  When you sell, then you have something different, and that's when it makes sense co calculate what you've gained or lost.

Probably because when I log into my brokerage account it says $XXX rather than "yep, still XX shares" :)

Quote
You are correct that people can't really have it both ways.  It's equally silly to say you made 4% on your mutual funds today than it is to say you lost 4% (or $40k) if you aren't actually making any transactions that lock in those prices.

But it would be fair to say your wealth or net worth has changed by 4%, which is what Sultan58 was arguing against.

By that logic, when your account goes up 45K because the market rises---then you can't really count that as an increase in your wealth or net worth because you haven't sold it and locked in that gain.

Losses are losses when the market closes....and gains are gains....you can't have it both ways. Pretending otherwise is silly.

FIRE47

  • Bristles
  • ***
  • Posts: 345
Re: Did anyone else just laugh yesterday when the market dropped?
« Reply #56 on: August 14, 2019, 10:13:56 AM »
Everyone still laughing now?

As far as losses go thatís up to you, I only count them annually. You have to pick an appropriate way to measure and go from there otherwise youíll be doing gains and losses daily which is not only bad for your sanity but for good decision making as well.

DeniseNJ

  • Stubble
  • **
  • Posts: 170
Re: Did anyone else just laugh yesterday when the market dropped?
« Reply #57 on: August 14, 2019, 10:47:17 AM »
When the stocks are worth a lot I feel rich, and when they have a low market value, I feel like I'm getting them on sale.  Right now I'm agitated, not bc my NW is going down but bc I don't have a bunch of extra money to buy more shares.  But I console myself with the fact that I'm still reinvesting dividends, so that's something.

Money that I would need today is not in stocks, although I'm super tempted to scrape every dime together to buy stock like they're beanie babies.

mancityfan

  • Stubble
  • **
  • Posts: 132
Re: Did anyone else just laugh yesterday when the market dropped?
« Reply #58 on: August 14, 2019, 11:36:12 AM »
Looks like by this logic there are a lot of people on here with a Net Worth near zero, until they sell their stock!

ChpBstrd

  • Handlebar Stache
  • *****
  • Posts: 1429
Re: Did anyone else just laugh yesterday when the market dropped?
« Reply #59 on: August 14, 2019, 11:50:37 AM »
Riddle me this, Batman...

I sold a put option on CRM a couple weeks ago at a strike price of $150 for about $2 a share. CRM then fell to $140. The shares will be assigned to me on Friday at $150 UNLESS they rally AND UNLESS I buy back the puts at a loss AND UNLESS I roll the position to a later date, taking a credit in the process.

Have I lost money yet?
How much?
When will I know?
Is this advice consistent with your advice regarding a simple stock position?

habaneroNorway

  • Stubble
  • **
  • Posts: 221
Re: Did anyone else just laugh yesterday when the market dropped?
« Reply #60 on: August 14, 2019, 11:53:43 AM »
No. Net worth isnít the same as hard cash. Mr market can take away a lot of your net worth in a short time, but not cash. Everything you buy or consume you pay for in cash. You canít buy shit off net worth - stores donít accept it.

Your net worth can be enough to FIRE until it isnít. And then it can take 10 years until you are. You still own the same - itís just worth less.

Dabnasty

  • Handlebar Stache
  • *****
  • Posts: 1818
Re: Did anyone else just laugh yesterday when the market dropped?
« Reply #61 on: August 14, 2019, 12:11:28 PM »
Looks like by this logic there are a lot of people on here with a Net WorthMonies near zero, until they sell their stock!

This would be correct. Net worth is exactly what it sounds like. If you take all of the things you own and figure up what they're worth, that's your net worth.

wageslave23

  • Bristles
  • ***
  • Posts: 470
  • Age: 34
  • Location: Illinois
Re: Did anyone else just laugh yesterday when the market dropped?
« Reply #62 on: August 14, 2019, 01:02:11 PM »
If the fair market value of my house goes down 10%, I don't say "I've lost $60,000 on my house this year".  And if it goes up, I don't say, "I made $60k on my house this year."  Because I still have exactly what I had before--a house. And that's how most people look at it.

But suddenly when it comes to equities, people get squirrelly and want to count a change in value as a loss in a way they wouldn't with a home, car, or other things they own.  But the same principle applies.  You have what you had the day before.  When you sell, then you have something different, and that's when it makes sense co calculate what you've gained or lost.

You are correct that people can't really have it both ways.  It's equally silly to say you made 4% on your mutual funds today than it is to say you lost 4% (or $40k) if you aren't actually making any transactions that lock in those prices.

Sorry but this has to be the dumbest thing I've ever read on here.  Stocks are basically as liquid as the money in your checking account.  By your logic, a 70 yr old with $5M in stock that they purchase 40 yrs ago for $1k is basically destitute.  The correct way of looking at it is they have made $5M.  They risk losing the $5M if they leave it in the market.  If you don't acknowledge that they have made $5M then you have to say there is no risk in leaving the money in the market because they don't have any money anyway.

I guess you can think of it however you want.  But just know that the entire banking, accounting and finance industry do not agree.  And it's really hard to do financial planning if you are using cost basis.
« Last Edit: August 14, 2019, 01:06:05 PM by wageslave23 »

GuitarStv

  • Senior Mustachian
  • ********
  • Posts: 13757
  • Age: 38
  • Location: Toronto, Ontario, Canada
Re: Did anyone else just laugh yesterday when the market dropped?
« Reply #63 on: August 14, 2019, 01:15:37 PM »
I guess you can think of it however you want.  But just know that the entire banking, accounting and finance industry do not agree.  And it's really hard to do financial planning if you are using cost basis.

When are you taxed on capital gains?

Hint - it's not the moment that the stock is worth more than it used to be . . . it's when you sell it.  Because that's when the gain actually becomes real.

Villanelle

  • Magnum Stache
  • ******
  • Posts: 2814
Re: Did anyone else just laugh yesterday when the market dropped?
« Reply #64 on: August 14, 2019, 01:25:01 PM »
If the fair market value of my house goes down 10%, I don't say "I've lost $60,000 on my house this year".  And if it goes up, I don't say, "I made $60k on my house this year."  Because I still have exactly what I had before--a house. And that's how most people look at it.

But suddenly when it comes to equities, people get squirrelly and want to count a change in value as a loss in a way they wouldn't with a home, car, or other things they own.  But the same principle applies.  You have what you had the day before.  When you sell, then you have something different, and that's when it makes sense co calculate what you've gained or lost.

You are correct that people can't really have it both ways.  It's equally silly to say you made 4% on your mutual funds today than it is to say you lost 4% (or $40k) if you aren't actually making any transactions that lock in those prices.

Sorry but this has to be the dumbest thing I've ever read on here.  Stocks are basically as liquid as the money in your checking account.  By your logic, a 70 yr old with $5M in stock that they purchase 40 yrs ago for $1k is basically destitute.  The correct way of looking at it is they have made $5M.  They risk losing the $5M if they leave it in the market.  If you don't acknowledge that they have made $5M then you have to say there is no risk in leaving the money in the market because they don't have any money anyway.

I guess you can think of it however you want.  But just know that the entire banking, accounting and finance industry do not agree.  And it's really hard to do financial planning if you are using cost basis.

And the bolded is one of the dumber things I've read on here, if we are pointing that out now and hurling insults as part of a debate.  I didn't say that your stocks should be looked at as $0 in your net worth. You may have inferred that, but it's not what I said or implied.  I said that you haven't lost (or gained) (as in "lost or gained anything actual or tangible") until you sell.  I didn't say you had zero net worth until you sell.  So that person certainly isn't destitute and nothing I said implies they are.

Then again, I'm also someone who doesn't track or care about net worth, in large part because I consider it a meaningless number.  That's because it includes my car, which is depreciating and which I won't sell (until it dies, in which case I will replace it). And it includes my sofa and my shoes and the canned goods in my pantry, if we are being pedantic

My net worth as of today is $X.  A week ago it might have been $X*1.04.  It would be accurate, though fairly meaningless in the long term, to say that my net worth went down 4%.  That is not the same as saying I lost $50k.  I *lost* nothing, because I have what I always had.  The value of what I had has changed. 

If I had a painting inherited from Great Grandpa Villanello, signed by and in the style of Picasso, I might consider it to be worth $1M, especially after getting an estimate telling me that similar Picasso's have sold for $900k-1.3M.  If the next day it is found that my "Picasso" was painted over an "E.T" movie poster by a guy named Bob, I have *LOST* nothing, IMO, though my net worth has taken a significant hint.  And had I sold that Picasso a day earlier, I'd have then had $1m.  But since I didn't, I have what I've always had--a painting of a guy with crocked eyes.   

You and others can certainly choose to look at it differently, but I hardly think this is a "stupid" way to view things.  And my way is far less likely to cause people to freak out and sell during a downturn.

Yes, stocks are liquid.  But until they are liquidated, what you have made or lost on them is theoretical.  And as such, unless you are preparing to sell*, it isn't a particularly useful piece of information. 

*Since this conversation has turned a bit polemical, I will point out that yes, there are a few other ways it may matter, including things like using the current value to qualify for a loan of some kind.  Just to head that off at the pass...

DeniseNJ

  • Stubble
  • **
  • Posts: 170
Re: Did anyone else just laugh yesterday when the market dropped?
« Reply #65 on: August 14, 2019, 01:25:53 PM »
Quote
Sorry but this has to be the dumbest thing I've ever read on here.  Stocks are basically as liquid as the money in your checking account.  By your logic, a 70 yr old with $5M in stock that they purchase 40 yrs ago for $1k is basically destitute.  The correct way of looking at it is they have made $5M.  They risk losing the $5M if they leave it in the market.  If you don't acknowledge that they have made $5M then you have to say there is no risk in leaving the money in the market because they don't have any money anyway.

Nope, they have not "made" a dime until they cash out.  They have stocks "worth" 5m.  They may also have a car worth 80K.  But they don't have 80K--they have a car worth 80K.  If next year the car is only worth 70K, then they still have a car but it's only worth 70K.  They haven't lost anything.  They still have the car.

Think Beanie Babies.  Ppl bought them and held them and they were worth a bunch of money bc other people wanted them and were willing to pay.  Until one day nobody wanted them and the demand shrank.  But the person who spent 50 bucks on them still is only out 50 bucks--they are just sad that they didn't sell in time when the sacks of beads were worth a lot more.

wageslave23

  • Bristles
  • ***
  • Posts: 470
  • Age: 34
  • Location: Illinois
Re: Did anyone else just laugh yesterday when the market dropped?
« Reply #66 on: August 14, 2019, 01:34:14 PM »
Quote
Sorry but this has to be the dumbest thing I've ever read on here.  Stocks are basically as liquid as the money in your checking account.  By your logic, a 70 yr old with $5M in stock that they purchase 40 yrs ago for $1k is basically destitute.  The correct way of looking at it is they have made $5M.  They risk losing the $5M if they leave it in the market.  If you don't acknowledge that they have made $5M then you have to say there is no risk in leaving the money in the market because they don't have any money anyway.

Nope, they have not "made" a dime until they cash out.  They have stocks "worth" 5m.  They may also have a car worth 80K.  But they don't have 80K--they have a car worth 80K.  If next year the car is only worth 70K, then they still have a car but it's only worth 70K.  They haven't lost anything.  They still have the car.

Think Beanie Babies.  Ppl bought them and held them and they were worth a bunch of money bc other people wanted them and were willing to pay.  Until one day nobody wanted them and the demand shrank.  But the person who spent 50 bucks on them still is only out 50 bucks--they are just sad that they didn't sell in time when the sacks of beads were worth a lot more.

Like I said think whatever you want but when you go for a loan they don't care whether your money is in stocks or cash because according to most people stocks are basically the same as cash.  And they are much different than beanie babies because they can be converted to cash in seconds.  They value of the dollar also changes constantly do you only consider the value of paper money once you have spent it?  In the beanie baby example those people gained thousands, decided to continue to hold them and then lost thousands.  Again you can think of it however you want, that's the way the IRS thinks about it, and cost accounting for inventory, but not many other people.

Dabnasty

  • Handlebar Stache
  • *****
  • Posts: 1818
Re: Did anyone else just laugh yesterday when the market dropped?
« Reply #67 on: August 14, 2019, 01:44:56 PM »
If the fair market value of my house goes down 10%, I don't say "I've lost $60,000 on my house this year".  And if it goes up, I don't say, "I made $60k on my house this year."  Because I still have exactly what I had before--a house. And that's how most people look at it.

But suddenly when it comes to equities, people get squirrelly and want to count a change in value as a loss in a way they wouldn't with a home, car, or other things they own.  But the same principle applies.  You have what you had the day before.  When you sell, then you have something different, and that's when it makes sense co calculate what you've gained or lost.

You are correct that people can't really have it both ways.  It's equally silly to say you made 4% on your mutual funds today than it is to say you lost 4% (or $40k) if you aren't actually making any transactions that lock in those prices.

Sorry but this has to be the dumbest thing I've ever read on here.  Stocks are basically as liquid as the money in your checking account.  By your logic, a 70 yr old with $5M in stock that they purchase 40 yrs ago for $1k is basically destitute.  The correct way of looking at it is they have made $5M.  They risk losing the $5M if they leave it in the market.  If you don't acknowledge that they have made $5M then you have to say there is no risk in leaving the money in the market because they don't have any money anyway.

I guess you can think of it however you want.  But just know that the entire banking, accounting and finance industry do not agree.  And it's really hard to do financial planning if you are using cost basis.

Dang, try not to be so harsh, especially when you're wrong :)

The two bolded portions are illogical conclusions. Villanelle explained the first. I'm not even sure how you came up with the second. Are you suggesting that the only thing that can be at risk is money? The value of the stock is what's at risk.


Like I said think whatever you want but when you go for a loan they don't care whether your money is in stocks or cash because according to most people stocks are basically the same as cash.

Yes, because what they care about is your liquid assets. Cash is a liquid asset. Stock is a liquid asset.

Stock is similar to cash in that way but stock ≠ cash.
« Last Edit: August 14, 2019, 01:54:56 PM by Dabnasty »

GuitarStv

  • Senior Mustachian
  • ********
  • Posts: 13757
  • Age: 38
  • Location: Toronto, Ontario, Canada
Re: Did anyone else just laugh yesterday when the market dropped?
« Reply #68 on: August 14, 2019, 01:54:50 PM »
Again you can think of it however you want, that's the way the IRS thinks about it, and cost accounting for inventory, but not many other people.

The IRS bills you for unsold stock values that change from day to day?

OurTown

  • Handlebar Stache
  • *****
  • Posts: 1138
  • Age: 49
  • Location: Tennessee
Re: Did anyone else just laugh yesterday when the market dropped?
« Reply #69 on: August 14, 2019, 01:55:55 PM »
It's not that difficult to understand.  The value of your investment is down, but it's not a loss until you sell.

Dabnasty

  • Handlebar Stache
  • *****
  • Posts: 1818
Re: Did anyone else just laugh yesterday when the market dropped?
« Reply #70 on: August 14, 2019, 01:57:54 PM »
It's not that difficult to understand.  The value of your investment is down, but it's not a loss until you sell.

I had no expectation of this being point of contention. Then again, this is the internet :)

wageslave23

  • Bristles
  • ***
  • Posts: 470
  • Age: 34
  • Location: Illinois
Re: Did anyone else just laugh yesterday when the market dropped?
« Reply #71 on: August 14, 2019, 02:10:39 PM »
If the fair market value of my house goes down 10%, I don't say "I've lost $60,000 on my house this year".  And if it goes up, I don't say, "I made $60k on my house this year."  Because I still have exactly what I had before--a house. And that's how most people look at it.

But suddenly when it comes to equities, people get squirrelly and want to count a change in value as a loss in a way they wouldn't with a home, car, or other things they own.  But the same principle applies.  You have what you had the day before.  When you sell, then you have something different, and that's when it makes sense co calculate what you've gained or lost.

You are correct that people can't really have it both ways.  It's equally silly to say you made 4% on your mutual funds today than it is to say you lost 4% (or $40k) if you aren't actually making any transactions that lock in those prices.

Sorry but this has to be the dumbest thing I've ever read on here.  Stocks are basically as liquid as the money in your checking account.  By your logic, a 70 yr old with $5M in stock that they purchase 40 yrs ago for $1k is basically destitute.  The correct way of looking at it is they have made $5M.  They risk losing the $5M if they leave it in the market.  If you don't acknowledge that they have made $5M then you have to say there is no risk in leaving the money in the market because they don't have any money anyway.

I guess you can think of it however you want.  But just know that the entire banking, accounting and finance industry do not agree.  And it's really hard to do financial planning if you are using cost basis.

Dang, try not to be so harsh, especially when you're wrong :)

The two bolded portions are illogical conclusions. Villanelle explained the first. I'm not even sure how you came up with the second. Are you suggesting that the only thing that can be at risk is money? The value of the stock is what's at risk.

Not trying to be harsh, especially not against the person.  The idea is just flat out wrong.  I think you guys are just arguing semantics so I'll leave it alone.  Because to me value in a commodity or other highly liquid asset is the same as money.  They are all a store of value with a ready market.  Your grandmother's wedding ring, beanie babies, and your house are not as liquid and do not have the same ready market so I understand if you don't want want to consider the gain in value.  When people say they gained $60,000 they don't literally mean they have 600 $100 bills, they use dollars because that is the commonly known currency.  They could also say I gained 3 Toyota Corollas in the market or 60,000 apples.  What happens is you sell all of your shares and then instantly but them back for the same price, then did you gain $60,000?  I would say yes, but I would also say you don't have to sell them in order to say you gained $60,000. 

Also I agree with the person who mentioned the IRS, they do not recognize the gain until sold.  Mostly that is because they want to encourage investment.

fattest_foot

  • Pencil Stache
  • ****
  • Posts: 682
Re: Did anyone else just laugh yesterday when the market dropped?
« Reply #72 on: August 14, 2019, 02:30:35 PM »
Like I said think whatever you want but when you go for a loan they don't care whether your money is in stocks or cash because according to most people stocks are basically the same as cash.  And they are much different than beanie babies because they can be converted to cash in seconds.  They value of the dollar also changes constantly do you only consider the value of paper money once you have spent it?  In the beanie baby example those people gained thousands, decided to continue to hold them and then lost thousands.  Again you can think of it however you want, that's the way the IRS thinks about it, and cost accounting for inventory, but not many other people.

Are you sure about this? Because I swear I've read several threads here on MMM about how difficult it is to get a mortgage with only investments as income. From what I know, banks absolutely do not treat equities equivalent to cash, nor income.

wageslave23

  • Bristles
  • ***
  • Posts: 470
  • Age: 34
  • Location: Illinois
Re: Did anyone else just laugh yesterday when the market dropped?
« Reply #73 on: August 14, 2019, 02:44:59 PM »
Like I said think whatever you want but when you go for a loan they don't care whether your money is in stocks or cash because according to most people stocks are basically the same as cash.  And they are much different than beanie babies because they can be converted to cash in seconds.  They value of the dollar also changes constantly do you only consider the value of paper money once you have spent it?  In the beanie baby example those people gained thousands, decided to continue to hold them and then lost thousands.  Again you can think of it however you want, that's the way the IRS thinks about it, and cost accounting for inventory, but not many other people.

Are you sure about this? Because I swear I've read several threads here on MMM about how difficult it is to get a mortgage with only investments as income. From what I know, banks absolutely do not treat equities equivalent to cash, nor income.

Lenders recognize the change the in value.  They basically consider investments at FMV not cost.  They consider equities equivalent to cash but not income from a w2.  Because income from equities is too volatile just like self employment income. 

DeniseNJ

  • Stubble
  • **
  • Posts: 170
Re: Did anyone else just laugh yesterday when the market dropped?
« Reply #74 on: August 14, 2019, 02:51:47 PM »
Quote
Your grandmother's wedding ring, beanie babies, and your house are not as liquid and do not have the same ready market so I understand if you don't want want to consider the gain in value.

You can think of it however you want but it isn't really a matter of opinion.  If my grandmother's ring were worth 60K, I would insure it.  The insurer would want it appraised to check its current retail value and would insure it for that amount. And I would list it as an asset.  That's why you can get a car loan or a mortgage, bc they are assets and have value as such. But you don't make money on your car or house or stock until you sell it.  The fact that there is a system in place to quickly sell stocks does not change the nature of them.  They are a thing and things only have the value that others will pay for them (we're not refering here to dividends).  If there was an ebay when beanie babies were a craze, there would have been a pretty quick exchange of buying and selling.

Buffalo Chip

  • Bristles
  • ***
  • Posts: 434
  • Location: Tidewater Virginia
Re: Did anyone else just laugh yesterday when the market dropped?
« Reply #75 on: August 14, 2019, 03:03:18 PM »
Naaaah. Not even chuckling yet. Today didnít even pop the circuit breakers. Iíll get interested when a long overdue bear market arrives.

Missy B

  • Stubble
  • **
  • Posts: 193
Re: Did anyone else just laugh yesterday when the market dropped?
« Reply #76 on: August 14, 2019, 10:58:43 PM »
I don't laugh at losing $45k.
It's going to happen along the bumpy road and I expect it, but nothing to laugh about.
I'm full invested so, a market drop is not a chance to get money in cheap.
 There are people that are really hurt by such a thing.

You only lost 45k if you sold.  Otherwise, you've lost nothing.

I'm always mystified by these comments-- "you only lost if if you sold and locked in that loss" or "it's only paper losses".   Try going to your banker and explaining, "yes I know yesterday I had 50K and now my account shows its down 45K...but, really I haven't lost anything because it's just a paper loss."  See how that goes over.

By that logic, when your account goes up 45K because the market rises---then you can't really count that as an increase in your wealth or net worth because you haven't sold it and locked in that gain.

Losses are losses when the market closes....and gains are gains....you can't have it both ways. Pretending otherwise is silly.


Actually, losses are losses WHEN YOU SELL, and gains are gains WHEN YOU SELL. Pretending otherwise is silly, yes. It is the true acid test for whether someone is still trapped in a beginner mindset or not.

I feel happier when my account is up 45K than when it is down 45K, but it really doesn't matter what kind of path the graph takes in between. Entry and exit, and whatever cashflow I get from dividends.

Focusing on paper losses and paper gains distracts from what is important: should you still be holding the investment? Not based on the stock price, but the company.

If you are holding index funds and are long, it is in my opinion a waste of time and emotional energy to be tracking the market and your paper gains and losses. Look at the market when you think you might to trade, otherwise, don't.

Alchemisst

  • 5 O'Clock Shadow
  • *
  • Posts: 76
Re: Did anyone else just laugh yesterday when the market dropped?
« Reply #77 on: August 14, 2019, 11:11:16 PM »
Naaaah. Not even chuckling yet. Today didnít even pop the circuit breakers. Iíll get interested when a long overdue bear market arrives.

How do you know it's overdue? Past performance? I'm not saying it is or isn't.. but trading by charts is risky, and blindly buying or selling when it's up or down is risky, for e.g the Argentinian market dropped 50% the other day so you'd think it's a buy, But it's still up 10x since 2013

FIREin2018?

  • 5 O'Clock Shadow
  • *
  • Posts: 91
  • I did Fire in 2018! :)
Re: Did anyone else just laugh yesterday when the market dropped?
« Reply #78 on: August 14, 2019, 11:35:56 PM »
i FiRED last year at age 48.

i also gambled in 2016 by moving a majority of my stock to Bonds when Trump became president.
twice  did the stock market tumble a little and my Bonds actually did a little better than stocks from when i converted in 2016.
but the stock market always recovered.

hopefully yesterday's 800 Dow point drop means a long sustained bear market where my Bonds will thrive.
will convert back to stocks when Trump leaves office.

FIRE47

  • Bristles
  • ***
  • Posts: 345
Re: Did anyone else just laugh yesterday when the market dropped?
« Reply #79 on: August 15, 2019, 04:58:20 AM »
Looks like its going to be a rough day again, futures plummeting fast when they used to be up...

I'm glad I rearranged my AA after the December movement, learned my lesson there and after markets hit a new high I rebalanced which is the plan I told myself I had to follow back in December. Still losing, but losing 50-60% less than market right now and in theory not giving up nearly that much of the gains. 100% equities is not really worth the premium you get compared to diversifying a bit for me.
« Last Edit: August 15, 2019, 05:01:09 AM by FIRE47 »

Raenia

  • Handlebar Stache
  • *****
  • Posts: 1071
Re: Did anyone else just laugh yesterday when the market dropped?
« Reply #80 on: August 15, 2019, 06:58:34 AM »
Quote
Sorry but this has to be the dumbest thing I've ever read on here.  Stocks are basically as liquid as the money in your checking account.  By your logic, a 70 yr old with $5M in stock that they purchase 40 yrs ago for $1k is basically destitute.  The correct way of looking at it is they have made $5M.  They risk losing the $5M if they leave it in the market.  If you don't acknowledge that they have made $5M then you have to say there is no risk in leaving the money in the market because they don't have any money anyway.

Nope, they have not "made" a dime until they cash out.  They have stocks "worth" 5m.  They may also have a car worth 80K.  But they don't have 80K--they have a car worth 80K.  If next year the car is only worth 70K, then they still have a car but it's only worth 70K.  They haven't lost anything.  They still have the car.

Think Beanie Babies.  Ppl bought them and held them and they were worth a bunch of money bc other people wanted them and were willing to pay.  Until one day nobody wanted them and the demand shrank.  But the person who spent 50 bucks on them still is only out 50 bucks--they are just sad that they didn't sell in time when the sacks of beads were worth a lot more.

Like I said think whatever you want but when you go for a loan they don't care whether your money is in stocks or cash because according to most people stocks are basically the same as cash.  And they are much different than beanie babies because they can be converted to cash in seconds.  They value of the dollar also changes constantly do you only consider the value of paper money once you have spent it?  In the beanie baby example those people gained thousands, decided to continue to hold them and then lost thousands.  Again you can think of it however you want, that's the way the IRS thinks about it, and cost accounting for inventory, but not many other people.

Actually, when we applied for a mortgage (just a few months ago, so under current policy), they refused to even look at our brokerage account balances.  They wanted W2s, bank balances (cash), and tax returns, nothing else.  Stock holdings counted for nothing, they wouldn't even look at them.  The only reason they would have accepted the documentation is if we had sold stock to get our downpayment, because they have to show the trail of where the money came from (anti-money laundering laws).  Nothing else.

habaneroNorway

  • Stubble
  • **
  • Posts: 221
Re: Did anyone else just laugh yesterday when the market dropped?
« Reply #81 on: August 15, 2019, 07:05:35 AM »
Actually, when we applied for a mortgage (just a few months ago, so under current policy), they refused to even look at our brokerage account balances.  They wanted W2s, bank balances (cash), and tax returns, nothing else.  Stock holdings counted for nothing, they wouldn't even look at them.  The only reason they would have accepted the documentation is if we had sold stock to get our downpayment, because they have to show the trail of where the money came from (anti-money laundering laws).  Nothing else.

Maybe not for retail clients, but equity can be posted as collateral for loans. The bank will then take a haircut (as there is risk that the market value might fall thus making the collateral less valuable) to the tune of 20-30% or so and most importantly: The bank most likely also have the right to liquidate the collateral  if the borrower doesn't pay or the collateral falls below a certain threshold or whatever.

Its a not uncommon way to leverage equity investments, but it's very risky and can lead to very steep losses / loss of everything if the value falls enough and liquidation is forced.

You generally don't want to borrow against your equity portfolio. It's not a good idea 'cause it's very risky.

DadJokes

  • Pencil Stache
  • ****
  • Posts: 674
Re: Did anyone else just laugh yesterday when the market dropped?
« Reply #82 on: August 15, 2019, 07:08:25 AM »
I don't laugh at losing $45k.
It's going to happen along the bumpy road and I expect it, but nothing to laugh about.
I'm full invested so, a market drop is not a chance to get money in cheap.
 There are people that are really hurt by such a thing.

You only lost 45k if you sold.  Otherwise, you've lost nothing.

I'm always mystified by these comments-- "you only lost if if you sold and locked in that loss" or "it's only paper losses".   Try going to your banker and explaining, "yes I know yesterday I had 50K and now my account shows its down 45K...but, really I haven't lost anything because it's just a paper loss."  See how that goes over.

By that logic, when your account goes up 45K because the market rises---then you can't really count that as an increase in your wealth or net worth because you haven't sold it and locked in that gain.

Losses are losses when the market closes....and gains are gains....you can't have it both ways. Pretending otherwise is silly.


Actually, losses are losses WHEN YOU SELL, and gains are gains WHEN YOU SELL. Pretending otherwise is silly, yes. It is the true acid test for whether someone is still trapped in a beginner mindset or not.

I feel happier when my account is up 45K than when it is down 45K, but it really doesn't matter what kind of path the graph takes in between. Entry and exit, and whatever cashflow I get from dividends.

Focusing on paper losses and paper gains distracts from what is important: should you still be holding the investment? Not based on the stock price, but the company.

If you are holding index funds and are long, it is in my opinion a waste of time and emotional energy to be tracking the market and your paper gains and losses. Look at the market when you think you might to trade, otherwise, don't.

Y'all are just arguing the difference between unrealized and realized gains/losses.

Accounting theory suggests that market value is generally the most accurate way to measure items, and FASB is gradually coming around to that idea. Therefore, even if you have no intention of selling, unrealized losses should still be considered losses.

It's still a silly thing to argue over if you believe the market will eventually recover and have no intention of selling in the short term.

Sugaree

  • Bristles
  • ***
  • Posts: 497
Re: Did anyone else just laugh yesterday when the market dropped?
« Reply #83 on: August 15, 2019, 07:23:38 AM »
I don't really pay attention to it.  I know that recessions and bear markets are inevitable, so I'd rather have one now rather than closer to retirement. 

Raenia

  • Handlebar Stache
  • *****
  • Posts: 1071
Re: Did anyone else just laugh yesterday when the market dropped?
« Reply #84 on: August 15, 2019, 07:25:28 AM »
Actually, when we applied for a mortgage (just a few months ago, so under current policy), they refused to even look at our brokerage account balances.  They wanted W2s, bank balances (cash), and tax returns, nothing else.  Stock holdings counted for nothing, they wouldn't even look at them.  The only reason they would have accepted the documentation is if we had sold stock to get our downpayment, because they have to show the trail of where the money came from (anti-money laundering laws).  Nothing else.

Maybe not for retail clients, but equity can be posted as collateral for loans. The bank will then take a haircut (as there is risk that the market value might fall thus making the collateral less valuable) to the tune of 20-30% or so and most importantly: The bank most likely also have the right to liquidate the collateral  if the borrower doesn't pay or the collateral falls below a certain threshold or whatever.

Its a not uncommon way to leverage equity investments, but it's very risky and can lead to very steep losses / loss of everything if the value falls enough and liquidation is forced.

You generally don't want to borrow against your equity portfolio. It's not a good idea 'cause it's very risky.

That still proves the point that the bank does not consider stocks equivalent to cash when deciding to give you a loan.  The terms of the loan are quite different if you are putting up a stock portfolio as collateral, vs a mortgage, car loan, or personal loan (no collateral).  In all those cases, stocks are not considered equal to cash, and are not generally considered when determining ability to repay.

Arbitrage

  • Bristles
  • ***
  • Posts: 435
Re: Did anyone else just laugh yesterday when the market dropped?
« Reply #85 on: August 15, 2019, 08:49:21 AM »
I don't laugh at losing $45k.
It's going to happen along the bumpy road and I expect it, but nothing to laugh about.
I'm full invested so, a market drop is not a chance to get money in cheap.
 There are people that are really hurt by such a thing.

You only lost 45k if you sold.  Otherwise, you've lost nothing.

I'm always mystified by these comments-- "you only lost if if you sold and locked in that loss" or "it's only paper losses".   Try going to your banker and explaining, "yes I know yesterday I had 50K and now my account shows its down 45K...but, really I haven't lost anything because it's just a paper loss."  See how that goes over.

By that logic, when your account goes up 45K because the market rises---then you can't really count that as an increase in your wealth or net worth because you haven't sold it and locked in that gain.

Losses are losses when the market closes....and gains are gains....you can't have it both ways. Pretending otherwise is silly.


I agree; I've never subscribed to the 'paper losses only' attitude.  Mark your investments to market. 

That said, if it doesn't affect their daily lives or behavior, and if that rationale helps people steer their way through market dips, then more power to them.

I don't laugh when the market dips, but I generally just shrug.  It's going to do what it's going to do.  If it drops enough, I do look for whether or not I'm close to triggering a rebalance, or whether I have an opportunity to tax-loss harvest.  I don't feel wonderful about the drop or anything - I like to see my balances increase - but I recognize them as a necessary part of investing in high-risk/high-return assets.

Missy B

  • Stubble
  • **
  • Posts: 193
Re: Did anyone else just laugh yesterday when the market dropped?
« Reply #86 on: August 15, 2019, 09:10:55 PM »
Naaaah. Not even chuckling yet. Today didnít even pop the circuit breakers. Iíll get interested when a long overdue bear market arrives.

How do you know it's overdue? Past performance? I'm not saying it is or isn't..

There are signs and portents. It is known.

Body Surfer

  • 5 O'Clock Shadow
  • *
  • Posts: 30
Re: Did anyone else just laugh yesterday when the market dropped?
« Reply #87 on: August 17, 2019, 02:57:27 PM »
I laughed because trade barriers are good and I'm happy we're finally getting a bunch of them. Godspeed to my two heroes USA President Donald Trump (very dumb) and Chinese President Comrade Chairman Xi Jinping (very smart, quite handsome, firm handshake)

Your are quite wrong. Try the opposite. We need to fix this unfair trade mess or we will have a very painful economic crunch. These minor over-reaction stock hiccups are pathetic. Fix the unfair trade practices against the USA and watch the economy and market soar.

Body Surfer

  • 5 O'Clock Shadow
  • *
  • Posts: 30
Re: Did anyone else just laugh yesterday when the market dropped?
« Reply #88 on: August 17, 2019, 03:11:49 PM »
Your $$ is what your portfolio says it is that day. If the market dropped badly today and you lost $45k- your portfolio is now down $45K... that is the new reality. Everyday is a new reality.

BuildingFrugalHabits

  • Stubble
  • **
  • Posts: 223
  • Location: Great Plains
  • Living the dream
Re: Did anyone else just laugh yesterday when the market dropped?
« Reply #89 on: August 17, 2019, 08:31:06 PM »
Yes, I am aware and definitely wasn't laughing.  I don't consider a large single day drop to be actionable but I prefer my investments to increase instead of tanking.  With regards to semantics, I do consider the present value of my house and investments to be part of my net worth.  If the value of either deceases substantially, my ability to deploy that capital elsewhere is also reduced. 

Bloop Bloop

  • Pencil Stache
  • ****
  • Posts: 800
  • Location: Melbourne, Australia
Re: Did anyone else just laugh yesterday when the market dropped?
« Reply #90 on: August 17, 2019, 08:57:18 PM »
After seeing my net worth fall by about $200k in the past year due to the housing market in my region not doing well, a small fall in the share markets is barely worth a thought. As most in this thread have said, you play for the long game. Also, something like a recession can be financially handy if you are wanting to find a good bargain.

RedmondStash

  • Pencil Stache
  • ****
  • Posts: 836
Re: Did anyone else just laugh yesterday when the market dropped?
« Reply #91 on: August 18, 2019, 11:38:21 AM »
Not to beat this very dead horse, but --

Although it is literally true that an unrealized gain in, say, a total-market stock index fund is no more real than an unrealized loss, historically, the market has always eventually gone up. So an unrealized gain is more likely to either stay a gain or be regained, and an unrealized loss is more likely to stop being a loss, if you give them enough time. In practice, they are not the same.

And that's why I laughed when the market dropped 3% on a single day. Because I was relieved that I understood enough about the market not to panic. And also relieved that I'd set an AA to enable me to absorb market drops for a while without locking them in -- so that I can eventually take those currently unrealized gains, and not have to take the unrealized losses.

I'm doing my best to educate my friends similarly, so they are also not hurt by stock market drops. A friend recently panicked about a drop in a specific stock price, and asked if I thought it would tank by the end of summer, so should they sell now? And I said, "You sell if you need the money to live on. If you don't need the money, don't sell. Just wait it out." And they didn't sell, and the stock recovered, and they were quite relieved.

I'm not laughing at people's misfortunes when the market drops. I'm laughing because knowledge has freed me from what might otherwise be a source of panic and poor decisions.

habaneroNorway

  • Stubble
  • **
  • Posts: 221
Re: Did anyone else just laugh yesterday when the market dropped?
« Reply #92 on: August 19, 2019, 12:51:31 AM »
A friend recently panicked about a drop in a specific stock price, and asked if I thought it would tank by the end of summer, so should they sell now? And I said, "You sell if you need the money to live on. If you don't need the money, don't sell. Just wait it out." And they didn't sell, and the stock recovered, and they were quite relieved.

While you can argue that the market itself eventually will recover, there is no reason to apply the same logic on a single stock. Companies come and go, some become mere shadows of their former self, some go bankrupt and some just go nowhere for years (in price terms).


Linea_Norway

  • Walrus Stache
  • *******
  • Posts: 5296
  • Location: Norway
Re: Did anyone else just laugh yesterday when the market dropped?
« Reply #93 on: August 19, 2019, 06:18:59 AM »
We are still in our last half year of actively acquiring stocks, so a sale is always good for that purpose. I have bought as much as I can afford with my extra amount of vacation money. The stocks that from my point of view were most on sale, was a Norwegian index fond. I have also bought a new bunch of those, although I also bought a good bunch of international ones. Let's now hope the Norwegian market will grow back to earlier heights again...

When our home is sold, then we free up a lot of cash. If the market tanks deeply, we might invest a pile of that in the stock markets, but otherwise we might stick to bonds and even put some on a savings account.

RedmondStash

  • Pencil Stache
  • ****
  • Posts: 836
Re: Did anyone else just laugh yesterday when the market dropped?
« Reply #94 on: August 19, 2019, 09:21:37 AM »
A friend recently panicked about a drop in a specific stock price, and asked if I thought it would tank by the end of summer, so should they sell now? And I said, "You sell if you need the money to live on. If you don't need the money, don't sell. Just wait it out." And they didn't sell, and the stock recovered, and they were quite relieved.

While you can argue that the market itself eventually will recover, there is no reason to apply the same logic on a single stock. Companies come and go, some become mere shadows of their former self, some go bankrupt and some just go nowhere for years (in price terms).

It's true, and I've counseled this friend to sell company stocks in favor of index funds. But this particular stock is for a large, robust company that's unlikely to fade away overnight. Baby steps. At least this friend reached out when they panicked, and then held instead of selling, and then saw everything smooth out again. So they'll be less likely to make rash decisions next time.