Posts tagged " value "

Where did the money go?

April 14th, 2020 Posted by Ask the Rabbi 18 comments

With the current stock market losses can you explain where the loss in value goes?

Brad

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?

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