Where is the money going?

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Kencsp
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Where is the money going?

Post by Kencsp » Mon Jul 30, 2018 10:06 am

I am a student of all this but with all students I am always learning. Especially with past performance never equally future results.

S0......With the FAANGs and tech dropping I have been watching curiously where that money would go to. If people are selling off one thing where are they putting that money to?

I know the usual theories of moving to dividend aristocrats or utilities or even strong healthcare companies but I am seeing EVERYTHING going down.

If people are selling now due to the "current discussed issues" where are people putting their money? (people that done necessarily buy and hold)

Where are bogleheads putting their money? (if you are rebalancing or taking profits)

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Pajamas
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Re: Where is the money going?

Post by Pajamas » Mon Jul 30, 2018 10:13 am

Seems like you're referring to risk-on, risk-off investing. Here's a brief overview of how it works and where the money goes:

https://www.bloomberg.com/news/articles ... -quicktake

Boglehead philosophy doesn't depend on the concept of changing portfolio allocation for market timing.

https://www.bogleheads.org/wiki/Getting_started
Bogleheads® emphasize regular saving, broad diversification, and sticking to one's investment plan regardless of market conditions.

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market timer
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Re: Where is the money going?

Post by market timer » Mon Jul 30, 2018 10:55 am

Essentially, everything has been going up for the past nine years. Why would it surprise you that asset prices can also move down together?

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warowits
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Re: Where is the money going?

Post by warowits » Mon Jul 30, 2018 11:10 am

Kencsp wrote:
Mon Jul 30, 2018 10:06 am

S0......With the FAANGs and tech dropping I have been watching curiously where that money would go to. If people are selling off one thing where are they putting that money to?
When someone sells Facebook, by definition someone buys Facebook. You cant just have selling. So when Facebook drops $120 billion in value no one took their $120 billion to some other investment. When people do their buying and selling we have just collectively decided Facebook is worth less.
There are an army of people whose pay checks depend on convincing people to invest in ways that are against their self interest. This forum is the volunteer army that fights back!

LiterallyIronic
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Re: Where is the money going?

Post by LiterallyIronic » Mon Jul 30, 2018 11:25 am

It's just like the value of a baseball card. Maybe last year people would've given me more for my Babe Ruth rookie card (I don't actually have one), than they'd give me this year. Doesn't mean the money "went anywhere". Same as if you buy apples on sale - the difference in price didn't "go anywhere".

If you're asking what I do with my money when it didn't cost as much to buy stocks, the answer is "buy more shares." I spend the same amount of dollars on stocks every month. It gets me however many shares it gets me.

Kencsp
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Re: Where is the money going?

Post by Kencsp » Mon Jul 30, 2018 12:38 pm

market timer wrote:
Mon Jul 30, 2018 10:55 am
Essentially, everything has been going up for the past nine years. Why would it surprise you that asset prices can also move down together?
Asking to learn here. My education tells me money doesn’t dissolve completely yet rather transfers locations while attaining or losing some value.

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Pajamas
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Re: Where is the money going?

Post by Pajamas » Mon Jul 30, 2018 12:48 pm

Kencsp wrote:
Mon Jul 30, 2018 12:38 pm

Asking to learn here. My education tells me money doesn’t dissolve completely yet rather transfers locations while attaining or losing some value.
Stocks or even markets can gap down without any trades occurring. In that case, value simply evaporates. Of course if you are valuing dollars in terms of stocks then the dollar is worth more in that situation because it buys more stocks, so I suppose it did transfer indirectly.

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onthecusp
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Re: Where is the money going?

Post by onthecusp » Mon Jul 30, 2018 12:52 pm

Actual money moving out of a stock is equal to the money that moved in. Someone bought what was sold.

Value changed because the transaction took place at a different price.

Headlines claiming that "Money is moving out of FAAG" are looking at half the transaction, it is just plain wrong.

MotoTrojan
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Re: Where is the money going?

Post by MotoTrojan » Mon Jul 30, 2018 12:54 pm

Kencsp wrote:
Mon Jul 30, 2018 12:38 pm
market timer wrote:
Mon Jul 30, 2018 10:55 am
Essentially, everything has been going up for the past nine years. Why would it surprise you that asset prices can also move down together?
Asking to learn here. My education tells me money doesn’t dissolve completely yet rather transfers locations while attaining or losing some value.
If a stock trades at $100 and then after a big event I sell my share to someone for $75, that $75 didn’t disappear, but a lot of other people (myself included) had $25 “dissolve completely”.

Jefferson
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Re: Where is the money going?

Post by Jefferson » Mon Jul 30, 2018 1:02 pm

The money didn’t disappear because it was never there in the first place. The money supply and the value of stocks/bonds are two completely different things.

Whenever stocks are traded (bought and sold), both sides of the transaction have to be equal. What then happens is that everyone else’s shares are adjusted in value to reflect the (relatively) tiny amount of shares traded that day.

At the end of the day, the value of your stocks is nothing more than a reasonable estimate of what you could get in the market if you sold all of it today.

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jhfenton
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Re: Where is the money going?

Post by jhfenton » Mon Jul 30, 2018 1:08 pm

Kencsp wrote:
Mon Jul 30, 2018 12:38 pm
market timer wrote:
Mon Jul 30, 2018 10:55 am
Essentially, everything has been going up for the past nine years. Why would it surprise you that asset prices can also move down together?
Asking to learn here. My education tells me money doesn’t dissolve completely yet rather transfers locations while attaining or losing some value.
That's the disconnect. Stocks aren't money. The aggregate value of Facebook is a fiction based on all of the existing shares multiplied by the price of the last trade. There is no "money invested in Facebook." There are just shares of Facebook stock. And people are willing to pay less for those shares today than a week ago.

TropikThunder
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Re: Where is the money going?

Post by TropikThunder » Mon Jul 30, 2018 1:22 pm

Kencsp wrote:
Mon Jul 30, 2018 10:06 am

S0......With the FAANGs and tech dropping I have been watching curiously where that money would go to. If people are selling off one thing where are they putting that money to?
Everyone is so quick to roll out their pre-formatted boiler plate answers that no one is actually addressing what OP asked:
-What are the sellers of FAANGs doing with the money they received? Are they keeping it in cash, buying other stocks, or buying bonds? That’s what OP wants to know, not why FAANGs dropped.

TropikThunder
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Re: Where is the money going?

Post by TropikThunder » Mon Jul 30, 2018 1:26 pm

MotoTrojan wrote:
Mon Jul 30, 2018 12:54 pm
If a stock trades at $100 and then after a big event I sell my share to someone for $75, that $75 didn’t disappear, but a lot of other people (myself included) had $25 “dissolve completely”.
OP isn’t asking if money vanished, he’s asking what did you do with the $75 you got from selling, stick it under your mattress?

Kencsp
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Re: Where is the money going?

Post by Kencsp » Mon Jul 30, 2018 1:29 pm

TropikThunder wrote:
Mon Jul 30, 2018 1:22 pm
Kencsp wrote:
Mon Jul 30, 2018 10:06 am

S0......With the FAANGs and tech dropping I have been watching curiously where that money would go to. If people are selling off one thing where are they putting that money to?
Everyone is so quick to roll out their pre-formatted boiler plate answers that no one is actually addressing what OP asked:
-What are the sellers of FAANGs doing with the money they received? Are they keeping it in cash, buying other stocks, or buying bonds? That’s what OP wants to know, not why FAANGs dropped.
Thank you for the good info everyone. I listen and learn from everything.

Tropik is correct as well. That’s my big curiousity. I know I’m not necessarily asking in reference to bh theory but overall understanding of our current market and the people in it.

Jefferson
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Re: Where is the money going?

Post by Jefferson » Mon Jul 30, 2018 2:07 pm

Fair point about OP asking where that specific money went. I think it’s worth bringing up that the whole drop happened after hours. I know nothing about after hours trading. I believe that takes regular investors out of the equation. Does that leave institutional investors (maybe?) or professional Wall Street traders?

Again, I know squat about after hours trading, so I could be waaaayyyyy off.

bhsince87
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Re: Where is the money going?

Post by bhsince87 » Mon Jul 30, 2018 2:08 pm

If I knew the answer to that, I'd be sitting on a yacht in the Caribbean right now.

The reality is, the majority of trades are from one computer to another. These are driven by algorithms developed by folks who are highly rewarded for their efforts. I've seen estimates that typical days see 60-70% of all trades done by machine, and on high volatility days, it can go above 90%.

Me personally? I haven't sold a stock or fund in probably 7-8 years. I'mm still in accumulation phase so i am constantly buying.

The only change I've made recently is to buy more CD's instead of bonds.
I plan to retire in a few years, and at that point, i will start selling stocks to capture capital gains, and will put that money into cash or CDs before spend it.
Retirement: When you reach a point where you have enough. Or when you've had enough.

pkcrafter
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Re: Where is the money going?

Post by pkcrafter » Mon Jul 30, 2018 2:09 pm

Kencsp wrote:
Mon Jul 30, 2018 10:06 am
I am a student of all this but with all students I am always learning. Especially with past performance never equally future results.

S0......With the FAANGs and tech dropping I have been watching curiously where that money would go to. If people are selling off one thing where are they putting that money to?
I don't know where people who owned/sold FAANGs did with that money. True Bogleheads would not own FAANG or dividend aristocrats, utilities, etc.

The problem is if you bought something for $100 and then wanted to sell it, but your best offer was $90, then you would have to accept $90. Where did the $10 go? If something happens and the entire stock market falls, it will continue to fall until a price is reached where investors are willing to buy.

If a Boglehead owned total stock market, total international and total bond and the market dropped 25%, the Boglehead would sell bonds and buy total market to get the target asset allocation back to target. That is buying low. If the market went up over 5% of target, the Boglehead would sell some total market to get back to target. Buy low, sell high, be happy. :happy

No more complicated than that.

Paul
When times are good, investors tend to forget about risk and focus on opportunity. When times are bad, investors tend to forget about opportunity and focus on risk.

daveydoo
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Re: Where is the money going?

Post by daveydoo » Mon Jul 30, 2018 2:50 pm

Kencsp wrote:
Mon Jul 30, 2018 10:06 am


Where are bogleheads putting their money? (if you are rebalancing or taking profits)
They generally don't take profits although they do re-balance -- sort of the same thing but different motivation. And they would re-balance into whatever was distressed and not out of it (within their asset allocation). That's the beauty of re-balancing -- it enforces the "buy low, sell high" mantra that is otherwise unachievable by just looking at financial "news."
"I mean, it's one banana, Michael...what could it cost? Ten dollars?"

MotoTrojan
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Re: Where is the money going?

Post by MotoTrojan » Mon Jul 30, 2018 3:03 pm

TropikThunder wrote:
Mon Jul 30, 2018 1:22 pm
Kencsp wrote:
Mon Jul 30, 2018 10:06 am

S0......With the FAANGs and tech dropping I have been watching curiously where that money would go to. If people are selling off one thing where are they putting that money to?
Everyone is so quick to roll out their pre-formatted boiler plate answers that no one is actually addressing what OP asked:
-What are the sellers of FAANGs doing with the money they received? Are they keeping it in cash, buying other stocks, or buying bonds? That’s what OP wants to know, not why FAANGs dropped.
What are the sellers of Total Stock Market doing with proceeds when the market is flying sky-high? Just seems like a weird question when EVERY transaction has a buyer and a seller.

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arcticpineapplecorp.
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Re: Where is the money going?

Post by arcticpineapplecorp. » Mon Jul 30, 2018 4:40 pm

Kencsp wrote:
Mon Jul 30, 2018 10:06 am
If people are selling off one thing where are they putting that money to?

I know the usual theories of moving to dividend aristocrats or utilities or even strong healthcare companies but I am seeing EVERYTHING going down.

If people are selling now due to the "current discussed issues" where are people putting their money? (people that done necessarily buy and hold)

Where are bogleheads putting their money? (if you are rebalancing or taking profits)
Bogleheads are not one mind. Some own the market and individual stocks. I believe that's called "core and explore".

Not "everything went down" today. Nike, Barclays, Royal Bank of Scotland and Lloyd's banking group are some examples. So don't assume "all" stocks went down. They didn't. I just heard on our local news that energy companies went up today with a rise in oil prices (don't know if that's true, just repeating).
source: http://thestockmarketwatch.com/markets/topstocks/

Even if all stocks did go down, that doesn't mean people that received money from selling stock in FAANG to buy other stocks didn't buy other stocks who's price went down. Why do you assume that if I buy a stock it has to go up? What if the stock goes down and I buy it then? So to make it seem like stocks only go up because people buy them is not correct. For every seller there is a buyer. The buyer is buying at a lower price. That's all. Over time, the price may go up if others buy the same stock from others at a higher price. Does that make sense?

You'd have to ask those who sold FAANG stocks recently what they did with the money they received from the sale of their shares. There are limited options:

They used proceeds from sale to buy other stocks (at higher or lower prices).
They used proceeds to hold in cash or other fixed income (bonds, etc.)
They used proceeds to spend.
They donated the stock previously and the charity sold it to fund their operations
They used proceeds to invest in the total stock market instead of individual companies (they've seen the light) :moneybag
And so on...
"Invest we must." -- Jack Bogle | “The purpose of investing is not to simply optimise returns and make yourself rich. The purpose is not to die poor.” -- William Bernstein

Kencsp
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Re: Where is the money going?

Post by Kencsp » Tue Jul 31, 2018 7:53 am

Thank you all. GOod info.

Just curiosity and willing to listen and learn.

balbrec2
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Re: Where is the money going?

Post by balbrec2 » Tue Jul 31, 2018 8:32 am

pkcrafter wrote:
Mon Jul 30, 2018 2:09 pm
Kencsp wrote:
Mon Jul 30, 2018 10:06 am
I am a student of all this but with all students I am always learning. Especially with past performance never equally future results.

S0......With the FAANGs and tech dropping I have been watching curiously where that money would go to. If people are selling off one thing where are they putting that money to?
I don't know where people who owned/sold FAANGs did with that money. True Bogleheads would not own FAANG or dividend aristocrats, utilities, etc.

The problem is if you bought something for $100 and then wanted to sell it, but your best offer was $90, then you would have to accept $90. Where did the $10 go? If something happens and the entire stock market falls, it will continue to fall until a price is reached where investors are willing to buy.

If a Boglehead owned total stock market, total international and total bond and the market dropped 25%, the Boglehead would sell bonds and buy total market to get the target asset allocation back to target. That is buying low. If the market went up over 5% of target, the Boglehead would sell some total market to get back to target. Buy low, sell high, be happy. :happy

No more complicated than that.

Paul
Pricing for marketable securities can be primarily summed up in three words,
Supply and Demand.

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