shows profound deterioration of wealth in 1 year time
Posted on 01/01/2009 12:43:49 PM PST by Kaslin
After months of tortuous trading, Wall Street rang out its worst year since the Great Depression yesterday, leaving shareholders $6.9 trillion the poorer.
It hardly mattered that the market finished the last day of the year with a modest gain.
The losses in 2008 were so broad and deep that every sector in the Standard & Poor's 500-stock index took a double-digit hit, and the financial sector lost more than half of its value. The Dow Jones industrial average, an index of 30 blue-chip stocks, and the S&P, a broader index watched by market professionals, were down 34 percent and 38 percent, respectively, their deepest losses since the 1930s. The tech-heavy Nasdaq composite index was down 41 percent, its worst year since the exchange was created in 1971.
Overseas, the year was just as dismal. In Germany, stocks were down 40 percent, in Japan, 42 percent, in Brazil, 41 percent. Taken together, all of the world's stocks lost 48 percent last year.
Traders endured unprecedented turmoil last year as Lehman Brothers, an icon of the financial industry, teetered then collapsed, while other firms were saved by government intervention or disappeared into the arms of competitors. By the end of 2008, the Dow had set new records for its three largest single-day point gains and two steepest point losses after swinging hundreds of points an hour during some sessions.
(Excerpt) Read more at washingtonpost.com ...
Easy come - easy go... (NOT)
That’s going to leave a mark
I've still got about 20 years before retirement, so I'm hoping that it will come back. I'm not selling at this point, just "hunkered down."
Mark
Ahh, yes. Well, let's not forget that it was also "wiped in."
wealth doesn’t dissapear, it just transfers to different hands.
A trader I once worked for used to say that.
Generally, I agree. However, if it's debt-generated, than it's a claim on future earnings. If the claim is nullified, as in a bankruptcy, then the present "wealth" represented by that claim is nullified right along with it.
It's a safety valve, incidentally, albeit one that is open to abuse.
It’s almost funny. The effects still haven’t been fully felt or the consequences fully appreciated. We’re not even out of the starting gate.
wait until the employment numbers come out this month — Jan. is the one month out of the year they don’t add imaginary jobs. My guess is that unemployment is going to top 10%, at least.
The Democrats sure know how to screw things up.
Was that $6.9 trillion in fiat money or did someone actually make a killing?
This isn’t even including Paulson Obligations.
I hate the R’s & D’s.
Thanks Chuck Schumer, Chris Dodd, Barney Frank, Harry Reid, Nancy Pelosi
No. Which hand got the $100,000 in equity that someone had in Jan 2007 on a $400,000 home that is only worth $300,000 today? No one. It just went away. Same with a stock that you have held. Now if you hold the asset in question you may regain that lost wealth, though the scope of the destruction makes that unlikely.
Because of the rules of fractional reserve banking it is even worse for banks. If you are a bank you have some assets that are your reserves. For every dollar of reserves you are allowed to have some amount of loans outstanding. When the assets devalue you suddenly have too many loans out, and you need to increase your reserves. You can sell something, but when everyone is doing it you aren't going to get a good price.
You go from being a bank with a very good balance sheet, able to make loans, to one with a crappy balance sheet, unable to make loans. The wealth of your bank has been destroyed.
http://www.freerepublic.com/focus/f-news/2153952/posts
(Just in case you missed it too.)
No. Which hand got the $100,000 in equity that someone had in Jan 2007 on a $400,000 home that is only worth $300,000 today? No one. It just went away. Same with a stock that you have held. Now if you hold the asset in question you may regain that lost wealth, though the scope of the destruction makes that unlikely.
Because of the rules of fractional reserve banking it is even worse for banks. If you are a bank you have some assets that are your reserves. For every dollar of reserves you are allowed to have some amount of loans outstanding. When the assets devalue you suddenly have too many loans out, and you need to increase your reserves. You can sell something, but when everyone is doing it you aren't going to get a good price.
You go from being a bank with a very good balance sheet, able to make loans, to one with a crappy balance sheet, unable to make loans. The wealth of your bank has been destroyed.
You’re applying the idea of “zero sum game” popular in stock trading to this mess. It doesn’t apply. The money lost was vaporized — it ain’t hiding.
Just wait till we hit 4-5k in 2009!
I know what you mean... though I'm hunkered down after getting laid off on Dec 1 at age 57. Took quite a beating -- we'll see what happens.
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