Relay-Version: version B 2.10 5/3/83; site utzoo.UUCP Path: utzoo!lsuc!dave From: dave@lsuc.UUCP Newsgroups: can.politics Subject: Re: market crash Message-ID: <2130@lsuc.UUCP> Date: Tue, 3-Nov-87 10:48:51 EST Article-I.D.: lsuc.2130 Posted: Tue Nov 3 10:48:51 1987 Date-Received: Fri, 6-Nov-87 05:24:51 EST References: <11436@orchid.waterloo.edu> Reply-To: dave@lsuc.UUCP (David Sherman) Distribution: can Organization: Law Society of Upper Canada, Toronto Lines: 62 rbutterworth@orchid.waterloo.edu (Ray Butterworth) writes: >Even more important, how many of those shares that were traded >were "real" shares? There were a lot of people out there selling >shares that they didn't own in the morning and then buying them >back in the afternoon at a large profit. I doubt it. First of all, selling short is done on a different account and under different circumstances. You have to have 150% margin to cover the short, and 100% of that goes into a short account that pays you no interest. As well, under TSE rules you can only short on an uptick, and October 19 didn't have a whole lot of upticks. (That rule exists to prevent exactly what you describe.) >Most share holders owned .000001% of some company before the "crash" >and they still owned .000001% of that company after. >The real value of that company, and hence those shares, >hasn't changed in the least. The value of the company is, by definition, what the market sets. >Unfortunately, most normal people see the inflated prices that >speculators have produced and think their stock is actually worth >that much. Then, when these artificial prices fall, they think >they have lost a lot of money. Since before the crash they could (and we did) sell their shares for profits, their stock WAS worth that much. That's what "market" means. >The only real change in value was for those people that speculate >and buy and sell quite frequently. They are the only ones that >should have been affected by this. Fair enough. If you bought 500 Royal Bank 5 years ago and you don't plan on selling it for another 5 years, the market price today is irrelevant. >The whole thing should be considered a joke. Well, it's fun, I'll grant you that much... >Unfortunately, no one is laughing (except the commission collectors >who's self-appointed function is to encourage such speculation). They aren't laughing either. Commissions on trades at half the price produce about half the commission. And in a bear market, no-one buys, and the brokers suffer. I look at our own trading patterns -- from 2-4 trades/week before the crash to very little now. We're waiting for things to recover -- however long that takes -- before we sell our current holdings and start trading on the swings again. "What do you call a Yuppie stockbroker?" "'Hey, waiter!'" David (well, it makes life more exciting) Sherman The Law Society of Upper Canada Toronto -- { uunet!mnetor pyramid!utai decvax!utcsri ihnp4!utzoo } !lsuc!dave Pronounce it ell-ess-you-see, please...