With the current stock market losses can you explain where the loss in value goes?
Great question, Brad,
May we try to put it into concrete terms? Suppose you owned a stock in the Weem, Acheit & Sellate Widget Company for which you had paid $10. Now you want to sell it but you can only get $6 for it. You’re asking, where is the other $4? The buyer who purchased your share for $6 doesn’t have your $4. The broker you might have used to facilitate the transaction doesn’t have it and W.A. & S. Widget Company doesn’t have it. So where did it go? That’s what you’re asking, right?
This question reminds us of a helpful old riddle. Three men had lunch together and the total bill came to $25. Each man handed the waiter a $10 bill. On his way back to the table with five $1 bills in change, the waiter had an idea. $5 change is hard to divide among the three diners, so the waiter pocketed $2 and gave each man $1.
With each man having handed over a $10 and got back $1 in change, each man ended up paying $9. Multiply by 3 as there were 3 men, so that comes to $27. Now remember the $2 in the waiter’s pocket and $27 + $2 = $29. Where is the missing $1? Did we start with $30, not $29? Who has the missing $1?