this post was submitted on 07 Mar 2025
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When people sell their stocks, that value doesn't vanish - it turns into cash.
So another way to look at is "rich people now have $1 trillion more in cash now than they did yesterday".
And that cash will turn back in shares at the next opportunity...
It's like a spring that gets pushed down and then released again later. All the energy used to push it down doesn't go away, it is stored in the spring.
I don't think it's entirely true:
Let's suppose there are 500shares trading at $10. The market capitalization is 5000$.
One person now trades one share for 9$. There are still 500 shares around (if the company didn't do a buyback) and now the market capitalization is 4500$. Where did the $500 go? Nowhere. The market cap just represents the perceived value of the company
This is the correct take.
There are not $1.5T worth of cash sitting around. What happened was a bunch of people tried selling their stock for $10, and when nobody would buy it for that, they sold it for $9. And when nobody would buy for that, they sold for $8. The market cap just dropped by 20%, but only $17 was made, not the $1000 the market cap "lost".
I consider myself schooled.
Also, $17 was made, but $17 was lost by the buyer. It doesn't generate money. It's all speculation.
No, stocks are not zero sum like a spring storing energy. They can in fact destroy wealth. Think about it. It would be pointless as an investment if they always paid out exactly what they were paid in.
yeah another way to easily realize that the person is wrong is to look at crypto, the market cap of those coins is based on the current price and the total available, same as stocks. However, you can't liquidate all of Bitcoin into trillions of dollars because the imbalance between people trying to sell and people trying to buy would drive the cost and therefore the market cap down significantly. A $100 million sell-off might wipe $1 billion in market cap.
This data is not saying that $1.15t in shares have been sold.
It means that the sum of all the values of all the shares on the exchange is $1.15t less than it was the day before.
All of the same shares still exist and are still owned by someone, with the exception of a few companies being wound up or a few companies being listed for the first time.
Which is a way of saying $1.15 trillion investor dollars are no longer convinced they can continue to grow via stock appreciation, and are convinced they are more valuable over time taking real losses from inflation when held as cash than they would be from even greater predicted future losses in stock valuations.
Normally, I would say that this money would be reinvested into other assets which are percieved to appreciate.
But when you have Warren Buffet selling off massive amounts of his stocks this week and a few weeks ago... and just holding it as cash...
... and also basically every single economic indicator is showing a very near term massive downturn, when the market cannot predict the near term future due to wildly erratic tariff threats and deporting most of our farm labor...
...when interest rate cuts don't actually fuel debt based growth because everyone's credit scores are shit and delinquencies are high, so no one is actually credit worthy enough to lend to, when the housing market is beginning to crash, when basically every major corporation you've ever heard of is announcing massive layoffs, when the government under which all this occuring is undergoing a coup/constitutional crisis...
Uh yeah, looks like smart money has realized that basically all current investment strategies are too risky, so the best move is to just sit on cash, as the expected loss from general inflation is looking to be less than all the wealth you'd lose from pouring investment dollars into anything right now.
The energy is being withdrawn from the spring because the spring is rotten and rusted and expected to snap and break, and that energy will go toward building and compressing a new spring after the shrapnel has taken out everyone who didn't get out early.
When investors en masse just withdraw into cash, that's usually a sign that everything is about to collapse.
Capitalists like safe, stable environments to invest in. Volatility bad.
But Trump and Elon are erratic volatility incarnate, mistakenly thinking they genius businessmen.
That happens when someone buys it. The money doesn't disappear but the value does
True but and this is anecdotal my all-world and stoxx 600 are up as much as my S&p is down which says there's def been a shift to other markets~~___~~