Where is stock sell-off $ going ?

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RIMDBogle
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Where is stock sell-off $ going ?

Post by RIMDBogle »

Where is stock sell-off $ going ?
==========================

Thanks for replies to my thread. I did find some interesting responses about raising interest rates.

I find the market respond positively upon FED chair guidance and selling-off next day.

What to read from this positive reaction followed by a sell-off?

I am hearing the sell-off caused by folks selling stocks and moving the $ to bond. I do see BOND price going south and yield raising.

How does Selling stock and moving $ to BOND help in long term?

What are the BONDS/ETF absorbing these $?

Thanks for your guidance.
Marseille07
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Re: Where is stock sell-off $ going ?

Post by Marseille07 »

Nobody knows for sure, but it seems like people are buying bonds. The Ten hit 3.14% early May but now only 2.78%, meaning people are buying bonds.

The other likely destination is simply...cash, as the APY is almost certain to rise quickly from here.
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whodidntante
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Re: Where is stock sell-off $ going ?

Post by whodidntante »

It need not go anywhere.

While terms like "sell off" get thrown around, it's basically nonsense. Equity prices are set by an auction. Selling pressure might be a better term to describe what causes equity prices to fall.
Californiastate
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Re: Where is stock sell-off $ going ?

Post by Californiastate »

Symantecs
Tanelorn
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Re: Where is stock sell-off $ going ?

Post by Tanelorn »

whodidntante wrote: Sat May 21, 2022 1:01 pm It need not go anywhere.

While terms like "sell off" get thrown around, it's basically nonsense. Equity prices are set by an auction. Selling pressure might be a better term to describe what causes equity prices to fall.
Or said another way, every share sold is bought by someone else for the same amount of money. So the money isn’t going into or out of stocks on a transactional level.

The thing that’s disappearing is the valuation of the pieces of paper that get traded around, which can rise or fall without any change in the amount of money involved. Just more optimists than pessimists and values go up, or, more recently, v. versa and they go down.
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ruralavalon
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Re: Where is stock sell-off $ going ?

Post by ruralavalon »

Californiastate wrote: Sat May 21, 2022 2:19 pm Symantecs
Semantics?

Actually it is not semantics. The dollars don't "go" anywhere.
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Re: Where is stock sell-off $ going ?

Post by LadyGeek »

This thread is now in the Investing - Theory, News & General forum (theory).
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Marseille07
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Re: Where is stock sell-off $ going ?

Post by Marseille07 »

Tanelorn wrote: Sat May 21, 2022 2:33 pm Or said another way, every share sold is bought by someone else for the same amount of money. So the money isn’t going into or out of stocks on a transactional level.

The thing that’s disappearing is the valuation of the pieces of paper that get traded around, which can rise or fall without any change in the amount of money involved. Just more optimists than pessimists and values go up, or, more recently, v. versa and they go down.
I think you're overthinking this.

First and foremost, the money from selling stocks is going to the seller's pocket as cash. What they do with the cash (buy bonds, for example) is up to them. They may choose to continue holding cash, in which case the money stays in their account.
Impatience
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Re: Where is stock sell-off $ going ?

Post by Impatience »

The market is not a zero sum game. It grows and shrinks in aggregate as individuals trade their tiny slivers of it. When prices drop, paper wealth is written down across the board.
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alpine_boglehead
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Re: Where is stock sell-off $ going ?

Post by alpine_boglehead »

whodidntante wrote: Sat May 21, 2022 1:01 pm It need not go anywhere.

While terms like "sell off" get thrown around, it's basically nonsense. Equity prices are set by an auction. Selling pressure might be a better term to describe what causes equity prices to fall.
Yeah, you see this everywhere and all the time - as if someone deliberately had an interest in spreading a misleading idea.

But it's probably just Hanlon's razor - no need to assume malice when stupidity explains it. Financial media get more clicks writing about dramatic "sell-offs" than "price movements".
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BuyAndHoldOn
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Re: Where is stock sell-off $ going ?

Post by BuyAndHoldOn »

“The stock market is a device for transferring money from the impatient to the patient.”
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Impatience
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Re: Where is stock sell-off $ going ?

Post by Impatience »

Also money needn’t “go” anywhere though in practice it is always is. The market can grow and shrink in value without inflows or outflows occurring. When a terrible shock news story prints the price drop is instant and not reliant on selling. Selling doesn’t “make” the price goes down it’s just evidence THAT the price has gone down.
ge1
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Re: Where is stock sell-off $ going ?

Post by ge1 »

$ are not going anywhere, it's the same amount of $ that is being invested. I always have to laugh when I hear "cash on the sidelines" and stuff like that. Ignoring new stock issuance and stock buy backs for a moment, at any given moment all securities have to be held by someone. When you sell, you sell to someone else, it's not like they disappear from the market place. So in a sell-off, all that is changing is how the same amount of shares are valued. Say Investor A was content holding speculative stock for $100, however now he is nervous and would rather have $80 in cash than stocks potentially worth nothing and sells his speculative stock to investor B for $80. Assuming no other trades are happening, that stock is now valued at $80, a decrease of $20. That $20 didn't go anywhere, it just reflects the fact that someone was willing to sell at $80 and someone else was willing to buy at $80 (in reality of course there are thousands and thousands of transactions which determine the market price).

It's the same when people are asking, where does the money go in a big stock market correction? It doesn't "go" anywhere, what people previously thought was worth "x" is simply now valued at "x-y%", that's it.
Marseille07
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Re: Where is stock sell-off $ going ?

Post by Marseille07 »

ge1 wrote: Sat May 21, 2022 2:56 pm Say Investor A was content holding speculative stock for $100, however now he is nervous and would rather have $80 in cash than stocks potentially worth nothing and sells his speculative stock to investor B for $80. Assuming no other trades are happening, that stock is now valued at $80, a decrease of $20. That $20 didn't go anywhere, it just reflects the fact that someone was willing to sell at $80 and someone else was willing to buy at $80 (in reality of course there are thousands and thousands of transactions which determine the market price).
Err, what? $100 went to Investor C who sold the share to Investor A at $100. So in this case:

Investor C: holds $100 cash
Investor A: paid $100, sold for $80, holds nothing after losing $20
Investor B: paid $80, holds stock

The $20 got locked in as a loss on Investor A.
Californiastate
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Re: Where is stock sell-off $ going ?

Post by Californiastate »

ruralavalon wrote: Sat May 21, 2022 2:33 pm
Californiastate wrote: Sat May 21, 2022 2:19 pm Symantecs
Semantics?

Actually it is not semantics. The dollars don't "go" anywhere.
It was the description of the event. It wasn't the location of money.
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Re: Where is stock sell-off $ going ?

Post by vineviz »

RIMDBogle wrote: Sat May 21, 2022 12:44 pm Where is stock sell-off $ going ?
At a very simplistic level, a bear market is a mechanism for transferring wealth from current investors to future investors.

It’s kind of like a money time machine.
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Re: Where is stock sell-off $ going ?

Post by Hola »

vineviz wrote: Sat May 21, 2022 4:56 pm
RIMDBogle wrote: Sat May 21, 2022 12:44 pm Where is stock sell-off $ going ?
At a very simplistic level, a bear market is a mechanism for transferring wealth from current investors to future investors.

It’s kind of like a money time machine.
Thank you. This is one of the best descriptions of investing ever. I can easily explain this to my daughters.
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Artful Dodger
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Re: Where is stock sell-off $ going ?

Post by Artful Dodger »

RIMDBogle wrote: Sat May 21, 2022 12:44 pm Where is stock sell-off $ going ?
==========================

Thanks for replies to my thread. I did find some interesting responses about raising interest rates.

I find the market respond positively upon FED chair guidance and selling-off next day.

What to read from this positive reaction followed by a sell-off?

I am hearing the sell-off caused by folks selling stocks and moving the $ to bond. I do see BOND price going south and yield raising.

How does Selling stock and moving $ to BOND help in long term?

What are the BONDS/ETF absorbing these $?

Thanks for your guidance.
I think that rising interest rates will draw money from equities. We’ve been reading for a long time that there’s no where else to put money except into the stock market since interest rates were so low. Well, now they’re not. I don’t recall exactly but I think when interest rates were in a “normal” 4%-6% range, forward PE was around 15. We’re around 20 now.
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Beensabu
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Re: Where is stock sell-off $ going ?

Post by Beensabu »

There is no stock sell-off.

There is a readjustment of the price that more people than not are willing to pay for future earnings at this particular moment in time.

It's not a sell-off. It's a recalibration.

Same with bonds. It's a readjustment of the price that more people than not are willing to pay for the yield of previously issued bonds.

Re-pricing. It happens. Sometimes, there's a temporary over-adjustment.

Selling shares when you don't need the money, for a reason that is not already a part of your long-term plan, does not help in the long term.

The plan is the plan, and you follow the plan, and you don't panic.

Follow your plan.
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Re: Where is stock sell-off $ going ?

Post by arcticpineapplecorp. »

Hola wrote: Sat May 21, 2022 7:26 pm
vineviz wrote: Sat May 21, 2022 4:56 pm
RIMDBogle wrote: Sat May 21, 2022 12:44 pm Where is stock sell-off $ going ?
At a very simplistic level, a bear market is a mechanism for transferring wealth from current investors to future investors.

It’s kind of like a money time machine.
Thank you. This is one of the best descriptions of investing ever. I can easily explain this to my daughters.
it's also been said that in bear markets stocks return to their rightful owners.
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Triple digit golfer
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Re: Where is stock sell-off $ going ?

Post by Triple digit golfer »

Money didn't go anywhere. Values dropped. Real estate is the same principle. If sales are taking place at 20% lower than six months ago, no money went anywhere now. People are just paying less than they would have for the same thing six months ago.
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scorcher31
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Re: Where is stock sell-off $ going ?

Post by scorcher31 »

I can't imagine why anyone not retired would be selling at all right now unless you desperately needed the money to survive. Why would anyone sell after the market has a 20% drop seems more like a time to ramp up purchasing. I am not counting tax loss harvesting because it goes out of one index fund and into an *almost identical one.
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Brianmcg321
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Re: Where is stock sell-off $ going ?

Post by Brianmcg321 »

Some of the money is going to me. I'm laughing every time my 401k and IRA deposits go in at these cheaper rates. The people selling are literally just giving me their money.
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