What is the value of stocks on the stock market based on?

I don't know, I was just wondering because a lot of people claim that billionaires like musk and bezos don't actually have billions of dollars, because it's all assets like stocks or properties. And so that is why they don't pay as much tax because it is "wealth" not "income". So because the stock prices can fluctuate you never know how much they're ACTUALLY worth.

My question is. If that is the case, how badly would the markets have to crash in order for these bozos to lose a majority of the "wealth" they have?

I admit I do not understand investing in the stock market. It seems like everything is juiced and all the numbers and valuations are made up. So what would it take to just let it implode and go away totally?

I guess 401k is all investment in the fake stock market too? I'm asking because I don't know, but I would think that is very foolish to rely on something that is based on nothing just hoping there will be growth in 40 or 50 years when you finally do retire.

Maybe I'm dumb. Probably.

in my experience Stocks are fickle and based on little more than Hearsay .

Have you ever played one of them carnival games?

I mean I basically have the same question. What suggests, to me, the market is a lot like the insurance industry which is a lot like the gaming industry is watching stuff happen that should shake the market and doesn't. Little known fact: Both of those industries basically use the same maths.

And then one day a whole bunch of folk are left holding the devalued bag. Except the House.

originally posted by: Ch1nch1lla
I don't know, I was just wondering because a lot of people claim that billionaires like musk and bezos don't actually have billions of dollars, because it's all assets like stocks or properties. And so that is why they don't pay as much tax because it is "wealth" not "income". So because the stock prices can fluctuate you never know how much they're ACTUALLY worth.

My question is. If that is the case, how badly would the markets have to crash in order for these bozos to lose a majority of the "wealth" they have?

Really depends on what they are invested in. In cases like Bezos and Musk I think most of their wealth is in assets so if the market were to fall any share prices would have minimal impacts.
For individuals who work for these companies, like CEO's or CFO's, they are given shares so while the total value may decrease in a market crash, its not a realized loss for them, they just make less, IF they sell.
For individual investors or traders like me, every penny counts on each investment and each trade.
What you really have to watch for is the big banks and investment firms. Nearly all of them are heavily invested in every company and if the market crashes, like in 08', they are the ones who suffer the most, or are supposed to barring "to big to fail" bailouts from uncle sam
The tricky part is, they are ever growing their control and influence over the market to prevent just that and this is why you will always here about how "rigged" the market is, because it truly IS.

I admit I do not understand investing in the stock market. It seems like everything is juiced and all the numbers and valuations are made up. So what would it take to just let it implode and go away totally?

All the investment firms and banks and market makers and hedge funds are all the same companies now. Citadel, Blackrock, JP Morgan, Virtu financial ect...
They are the liquidity for the market, when i want to buy or sell shares, it goes through them, then it gets settled by the companies later
They are their own banks that act as hedge funds, borrowing from one to pay the other, like your 401k or company retirement fund

I guess 401k is all investment in the fake stock market too? I'm asking because I don't know, but I would think that is very foolish to rely on something that is based on nothing just hoping there will be growth in 40 or 50 years when you finally do retire.
Yes they are, it is an investment. This is where the hedge funds get a lot of their borrowed cashflow and why it costs extra to cash out early.

Maybe I'm dumb. Probably.

LOL your only dumb if you invest in the stock market....
But seriously, there is a lot to understand and i dont have all the answers, for you or for me. I have been investing for over 20 years but I have only recently begun to try my hand at day trading. Two entirely different beasts!

Stock market prices are typically based on financial performance of a company and in some cases future growth potential.

Some people like to say buying stocks is gambling, but it really isn't. Gambling is a lot more random. Stock prices on the other hand are usually based on verifiable facts. With public companies, you can get their financial statements showing assets, liabilities, revenues, etc and use tried and true ratios and financial analyses to determine the value of the company and stock prices. There are all kinds of simple ratios investors look at like Price/Earnings or PE ratios. They look at things like EBITDA (Earnings Before Interest Taxes Depreciation and Amortization).

Generally speaking, the markets return about 10% a year over the long term. However, if you buy the right stocks early and hold you can see substantially higher returns. Obviously, the risk is that some companies stop doing well and the stock prices can crash. For example, a few grand invested in Amazon when they went public in the mid 90s would be worth a few million now. Whereas if you invested in say Pets.com you lost everything. This is why diversification is key. Some explode in value. Others stay consistent. Some lose value. But altogether, you generally gain about 10% a year.

Markets crashing is not good. Most people are invested in the market one way or another.

It is easy to figure out how much wealth someone like Bezos loses / gains. You just look up how much they own of Amazon and see what they daily price is of the stock.

a reply to: datguy

a reply to: Edumakated

Considering the current economic climate in the U.S. and the geo-political aspect of BRICS etc are y'all diversifying differently?

a reply to: The GUT

i have actually un diversified...
I was invested in several energy and oil companies but I have since sold those and moved into some smaller scale but consistent tech companies. Boston scientific, GE is doing well, Boeing, im losing some in Virgin Galactic and i refuse to invest in Tesla.
Cryptocurrency seems to be the way to go and i have some in etherium because i dont like the idea of buying fractional shares of bitcoin, seems like scam to me (fractional shares, not bitcoin)

I actually used follow up and research and what was going on in government to look for good investments, i have had a watchlist set up on one of my trading apps called Pelosi, she made me some money a few years ago with Nextera energy and Emerson.

Honestly the best things i have going right now are my bank stocks, though i hate the companies they currently hold my largest returns, again as i sad in my last post and as you have said, they run the show, dont bet against the house

I thought it was the DOW, one share of the top 30 stocks added together, SnJ one of all of their stocks, and so on.

originally posted by: The GUT
a reply to: datguy

a reply to: Edumakated

Considering the current economic climate in the U.S. and the geo-political aspect of BRICS etc are y'all diversifying differently?

Not really. Just broadly invested 80% in equities, 20% in bonds. Wife works in tech, so we've benefited from her RSU grants over the years.

Ghostly apparitions and profit margins .
Mostly ghostly apparitions in an attempt to sway investors .

I think they call it a confidence game. You are putting your money in something that others need to put theirs in also. If you all trust in the system, the value goes up. A few can cash out and invest in another game. Now, if the trust drops by the company that is using your money suddenly doing something stupid, then everyone wants to get their money out of that game before all the money is out of that particular game.

The ones that put money in the games when the price of the tokens, known as stock, and sell off the tokens when others want them more than when they bought in, make a profit. If you sell your tokens at less value than when you bought them, then you have a loss.

Years ago, I had 40 something thousand in the market. A gasoline pipeline blew out an elbow in Alabama. I lost about 10 thousand over night. The stupid thing in this case was they just had repaired that elbow and blew it out the second time in a month. Both breaks caused a gasoline shortage in the southeastern United States. Some people did not trust them to do the right thing because of this and took their money out. This reduced the value of that stock in my mutual fund. I gained it back within a year but it still was a temporary loss.

It is all a game where if everyone plays nicely and companies do what they say they are going to do with your money, you can make money. But if something happens unexpectedly, things can go down in value quickly.

It is gambling with a lot of extra steps.

try looking any 30 year period of u.s. dow jones and see big increase always

originally posted by: beyondknowledge2
I think they call it a confidence game. You are putting your money in something that others need to put theirs in also. If you all trust in the system, the value goes up. A few can cash out and invest in another game. Now, if the trust drops by the company that is using your money suddenly doing something stupid, then everyone wants to get their money out of that game before all the money is out of that particular game.

The ones that put money in the games when the price of the tokens, known as stock, and sell off the tokens when others want them more than when they bought in, make a profit. If you sell your tokens at less value than when you bought them, then you have a loss.

Years ago, I had 40 something thousand in the market. A gasoline pipeline blew out an elbow in Alabama. I lost about 10 thousand over night. The stupid thing in this case was they just had repaired that elbow and blew it out the second time in a month. Both breaks caused a gasoline shortage in the southeastern United States. Some people did not trust them to do the right thing because of this and took their money out. This reduced the value of that stock in my mutual fund. I gained it back within a year but it still was a temporary loss.

It is all a game where if everyone plays nicely and companies do what they say they are going to do with your money, you can make money. But if something happens unexpectedly, things can go down in value quickly.

It is gambling with a lot of extra steps.

It is gambling where you can see some of the cards.... however, you can't predict the future. Govt, technology, competitors, changing tastes, etc can all affect how a company performs over time.

It is interesting because politicians and activist love to talk about corporations controlling everything. While this is true to some extent, the free market is constantly evolving. The top companies from 25-50 years ago hardly exist today. We have new players.

Remember Blockbuster? Remember when IBM ruled tech? Gateway computers? Sears? Kmart? Enron?

The best investors tend to buy when everyone else is panic selling. The markets almost always come back. It isn't a loss until you sell. I remember when Apple was damn near bankrupt and at like $20/share....

a reply to: datguy

Cryptocurrency seems to be the way to go and i have some in etherium because i dont like the idea of buying fractional shares of bitcoin, seems like scam to me (fractional shares, not bitcoin)

They aren't "shares", so you wouldn't be buying fractions of a share, you would just be buying fractions of a Bitcoin, a decentralized crypto-currency. You would be buying full Satoshis though.

Some websites allow you to purchase fractions of stocks, which I see no problem with, especially when they allow you to do so with little to no fees.

To answer the question in the thread, stocks are worth what people are willing to pay for them, and that is often determined by the health of the company.

Banks are currently offering CDs with interest rates around 5%.

Oh, and on a side note, student loan interest charges went back into effect July 1st and repayment goes back into effect September 1st. A lot of people are in for a rude awakening. How many young adults bought overpriced homes, these last few years, because they didn't have to make student loan payments? And what would the housing market look like, if loan payments weren't put on hold all this time?

originally posted by: datguy

i have actually un diversified...
I was invested in several energy and oil companies but I have since sold those and moved into some smaller scale but consistent tech companies. Boston scientific, GE is doing well, Boeing, im losing some in Virgin Galactic and i refuse to invest in Tesla.
Cryptocurrency seems to be the way to go and i have some in etherium because i dont like the idea of buying fractional shares of bitcoin, seems like scam to me (fractional shares, not bitcoin)

Diversification through un-diversification has been my intuition too although I'm not as knowledgeable as yourself concerning the market. And as much as I want to trust crypto I just can't and the learning curve seems a little steep if you don't want to take a bath. Commodities are talking to me lately.

originally posted by: Edumakated
Stock market prices are typically based on financial performance of a company and in some cases future growth potential.

And sadly, in the last couple of years anyway, many stocks have seen their prices/worth? fluctuate due to retail investor sentiment that is based on emotion. One tweet can make a stock price go from 3.00/share to 90.00/share very quickly. It's like a game more than anything now. That is why I went from swing trading to scalping mostly this year.

a reply to: Ch1nch1lla


Short term, you buy and sell the shares and make/lose the money on the differences in the prices.

For the long term the stock exchange works like this... when you own the shares you get a 'dividend' £££ of the companies yearly profits. The share reflects the 'confidence' that the company will produce these profits.

Shares can be owned by people or companies. Take for example a pension provider would buy shares of reliable companies to guarantee the 'dividend' £££ that pays for the pension payment for Mr M.Mouse. If the money isn't 'almost' guaranteed, they sell the shares and re-invest elsewhere.

a reply to: Ch1nch1lla

I think how they do this is take payment with stock options. You tell the company to pay you in their stock instead of from the payroll, they don't get taxed because they haven't cashed in the stock. When the bull market is happening and your unrealized money is at it's peak, they then go get a loan and borrow against the millions in stocks. They are able to get large loans because the bank sees that they have their funds tied up in the market.

The value of stock is based on belief, not actually the value of the company. A company can have it's stock go down from a hundred bucks to one dollar, and the company can still be a viable company and everyone can still be working at the company and getting paid. The stock market is a gambling organization. Companies sell stocks, but they are not liable if the stock crumbles and if it does, it does. Remember that when investing in stock. It only has a residual value of a penny or two on a dollar and that is only if they go bankrupt.

We do still have some stocks, but they have lost about twenty percent in the last three years. They used to tell you years ago when you would go to buy stocks...never spend more than you can afford to lose in the stock market. Now they say nothing about that anymore.

You play the stockmarket, it is a gambling game. Some stocks are more secure than others, but lately, even the stable stocks are all over the place. It is a risky time to invest in the stock market in my opinion...but we still own maybe twenty grand in the market, down around five grand over the last three years. Our stock pays dividends though, so we have gotten about thirty five hundred of that in dividends in that three years.

a reply to: Ch1nch1lla

What is the value of stocks on the stock market based on?

Since no-one has actually answered this question properly, allow me.

The value of stocks (company shares) is based on how much someone is willing to pay for them. That’s all.

Of course, that is what the market value of anything is based on. Your house, your car, your daughter (if you live in that kind of country) and your stamp collection are only worth what someone is willing to give you for them. But there are always reasons why someone is willing to pay a certain amount for something, and in the case of stocks this divides up into a few straightforward components.

1. The profitability of the company, which determines what income and assets you receive from your company at the end of every financial year in the form of dividends. The actual amount you receive will depend on how much stock you hold.

2. The condition of the industry or the economic sector in which that company operates. If it looks like the sector is set to make big profits or pay off steadily over the long term, the value of all companies (stocks) in that sector will improve. If the sector seems to be heading towards a less profitable phase, the value of all stocks in the sector will fall.

3. The state of the economy as a whole. This is reflected in GDP growth, employment, inflation, successful participation in international trade agreements, world demand for products and services produced by the national economy, etc. These factors affect the value of all stocks.

4. Wars and Acts of God such as natural disasters which can affect all of the above, thereby impacting the profitability of companies -- though not all in the same way. For example, a drought may cause agribusiness stocks to fall but raise the share value of ice-cream vendors and sunscreen manufacturers.

5. Rumours, lies, propaganda and conspiracy theories -- aka 'word of mouth'.

It gets complicated. Big investment firms have large teams of people looking at all these variables and stitching together their findings and forecasts in order to advise their customers what to buy and what to sell. In reality, though, their predictions have a big component of hit-and-miss in them. A reasonably well-informed person making their own investment decisions may do just as well, sometimes better. It’s a dangerous game either way.

*

a reply to: datguy

LOL your only dumb if you invest in the stock market.

I invest in stocks. I’ve made a bit of money out of them over the years. Not millions and millions, but some.

Your post is pretty good, I reckon, but it doesn't really answer the OP's question. So I've done that. Between us, we may have helped demystify this a bit for some people.