Newfie wrote:THIS is what I rant on about in reference to the 0.1% wealth. It is not real, fake I tell you, fake.
So Zuckerburg lost $16 Billion? FB $120 BIllion? I don’t think so.
Here is the analogy, a close analogy. Let’s say you invested $1 million with Bernie Madoff. Bernie sends you letters saying everything is rosey you now have $10 million. Then it crashes and you have zip, $0. How much did you loose? $1 million, not $10 million. You did not loose $9 million because it never existed in the first place. Same here except it doesn’t go to zero. Back to the analogy, Bernie had SOME real assets. FB is not at zero, it still has some real assets.
Respectfully, I disagree to at least some extent.
To the extent that Zuckerberg could have unloaded his FB stock (over time) without meaningfully impacting the market, then that wealth was "real". So, if he wanted to liquidate $1 billion in FB stock over the course of, say, 3 months, to diversify -- it's likely VERY reasonable to assume he'd get roughly 99% of the average market price over that time.
For example, people own houses. Though not liquid at full price, isn't their worth "real", or the bulk of their worth? Or used cars. Or stocks or bonds or gold coins or art etc. -- more liquid than houses for sure, but certainly not anything remotely like worthless.
I have a diversified investment portfolio worth X. Because I'm conservative financially, I tend to keep close enough to half of it in near cash (money market funds and the like). (I'd far rather be a happy guy who can eat every day and pay the bills than have X more dollars by being aggressive and lucky. If that's cowardice, I'll stipulate to that. I call it prudence for a retiree.)
Now, is the half in near cash worth .5X but the half in things like stock index funds and gold and stock option spreads worth zero? I beg to differ. I could choose to liquidate the non-near-cash portfolio on day D without moving the markets I'm involved in by even .1%. For the options, I might move that more like 1% in some cases, but not enough to get excited about (remembering the put-call option parity concept).
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Bottom line, just because assets aren't liquid cash or near cash and aren't even close to being spent doesn't mean they're "fake" or "unreal" IN ANY WAY. They're just less liquid than cash, and far more volatile in value than cash. Major markets trade about 250 days a year, very reliably.
Was the roughly 10X I gained on holding MSFT calls for the last half of the 90's "unreal"? (I'd always rather be lucky than smart). For the 80% of the position I was fortunate enough to exit when the government filed the antitrust lawsuit on them, it certainly didn't seem unreal. It was deposited just fine. It bought other assets just fine.
If an small to mid-sized investor had gotten out of the Madoff scheme, say a year before it was exposed, they would have gotten "full asset value" for their withdrawals, since Madoff wanted the scam to stay undetected. So would the assets they withdrew have never existed? NO, because the cash would have spent or earned interest, etc. just fine.
Given the track record of the perma-doomer blogs, I wouldn't bet a fast crash doomer's money on their predictions.