$47 billion disappears!

[Darth Wong]

Don't know how many of you are following economic news aside from the sub-prime crisis, but GE just took a 13% haircut, and when you take 13% off a market cap somewhere north of $365 billion, it means $47 billion just vanished into the ether.

This is the problem I've always had with speculative market activity though; how real was this $47 billion in the first place? It seems like speculative money only becomes real when a rich guy pockets it or the taxpayers are expected to replace it.

[weemadando]

There is never that much money. That's my understanding.

That's the theoretical value that the company has at any given time. Problem is, aforementioned rich-bastards forgot that this was meant to be an honest indication of value in order to allow for self-correcting markets, taxation and all the other things essential to have a capitalist system not implode.

Sadly, being a capitalist system, the rich pricks occassionally need to be reminded of how the market system really works by having some of their money taken away. Sadly, they choose to pass that on to the people who can't really afford it, but to be quite fair if even 2% of the bastards try to fly then it was all worth while.

[J]

This is the problem I've always had with speculative market activity though; how real was this $47 billion in the first place? It seems like speculative money only becomes real when a rich guy pockets it or the taxpayers are expected to replace it.

I don't think anyone really knows for sure, and even if they did I doubt there'd ever be a consensus.

It's kinda like the old economist joke:

A mathematician, an accountant and an economist apply for the same job.

The interviewer calls in the mathematician and asks "What do two plus two equal?" The mathematician replies "Four." The interviewer asks "Four, exactly?" The mathematician looks at the interviewer incredulously and says "Yes, four, exactly."

Then the interviewer calls in the accountant and asks the same question "What do two plus two equal?" The accountant says "On average, four - give or take ten percent, but on average, four."

Then the interviewer calls in the economist and poses the same question "What do two plus two equal?" The economist gets up, locks the door, closes the shade, sits down next to the interviewer and says "What do you want it to equal?"

As far as I can tell, how real the money is depends on what they intend to do with it. For tax purposes it's not real money, for executive stock options it's real money, and so forth.

[The Kernel]

Don't know how many of you are following economic news aside from the sub-prime crisis, but GE just took a 13% haircut, and when you take 13% off a market cap somewhere north of $365 billion, it means $47 billion just vanished into the ether.

This is the problem I've always had with speculative market activity though; how real was this $47 billion in the first place? It seems like speculative money only becomes real when a rich guy pockets it or the taxpayers are expected to replace it.

The best answer to your question would be to look at the P/E ratio of GE stock which as of this writing is 14.75. That's actually pretty conservative (Google for example has a P/E ratio of 34.41, Microsoft is 16.09) and I think that the hit they just took was probably more reactionary than indicative of any future downward trend at GE.

The point is that although markets tend to be volatile, there is a lot more than hot air backing up the value of GE stock.

[Durandal]

A mathematician, an accountant and an economist apply for the same job.

The interviewer calls in the mathematician and asks "What do two plus two equal?" The mathematician replies "Four." The interviewer asks "Four, exactly?" The mathematician looks at the interviewer incredulously and says "Yes, four, exactly."

Then the interviewer calls in the accountant and asks the same question "What do two plus two equal?" The accountant says "On average, four - give or take ten percent, but on average, four."

Then the interviewer calls in the economist and poses the same question "What do two plus two equal?" The economist gets up, locks the door, closes the shade, sits down next to the interviewer and says "What do you want it to equal?"

Actually, the mathematician's answer is "Five, for sufficiently large instances of two."

[Admiral Valdemar]

Actually, the mathematician's answer is "Five, for sufficiently large instances of two."

You fucking maths junkies piss me off. Begone, good sir, and take your devilry with you!

Don't know how many of you are following economic news aside from the sub-prime crisis, but GE just took a 13% haircut, and when you take 13% off a market cap somewhere north of $365 billion, it means $47 billion just vanished into the ether.

This is the problem I've always had with speculative market activity though; how real was this $47 billion in the first place? It seems like speculative money only becomes real when a rich guy pockets it or the taxpayers are expected to replace it.

Big as this amount is to you and me, in the grand scheme it's peanuts. The big concern is that this happened to such a well known and supposedly well to do company like GE. Having that amount vanish for no real reason is pretty alarming, even if we're talking about hundreds of billions in write-downs across the board now.

Don't think this is the end of it either. There are likely a great many big corporations out there that have just as much exposure to this mess as the banks, building societies and estate agents.

[SirNitram]

Losses up to one trillion.

Trillion.

And it all appears to be vaporware, to use the techterm. Money backed by trash, sold for trash, and written down and we all go onwards. No wonder the dollars nose-diving: There's nothing to catch the fall of value.