by Deb Cupples | Yesterday, the Washington Post reported:
People do tend to like definitive-sounding numbers -- and they're convenient for journalists and bloggers to repeat. Still, I question whether shareholders actually are "$6.9 trillion poorer."
Perhaps the Washington Post writer had meant that stock values collectively declined by $6.9 trillion in 2008 -- but that's very different from stating that shareholders actually lost $6.9 trillion.
To realize a loss (or gain), shareholders must actually sell their stocks. Before one turns a share of stock into actual cash (by selling), their is no actual loss or gain of wealth.
So yes, any shareholder who sold stocks in 2008 for less than he or she had originally paid for them lost some money.
Conversely, shareholders who are hanging onto to their now-lower-priced stocks have not yet lost or gained anything.
And who knows: if shareholders hang onto their now-lower-priced stocks, the prices might rebound over the next few years -- after which point, said shareholders might sell and realize gains.
The only way that I can think of for the Washington Post (or its data source) to calculate the actual collective losses of investors in 2008 would be to figure out: 1) what all stocks sold for in 2008; and 2) what every shareholder had originally paid for those stocks -- though some shareholders might have bought those stocks years ago.
I have trouble believing that anyone has yet successfully undertaken those overwhelming tasks.
Memeorandum has commentary.
Other Buck Naked Politics Posts:
* Cleaning up Political and Corporate Culture Could Help Economy
* Goodbye to 2008 -- and Good Riddance to an Era
* Time Magazine on Bush's Costly Wars: What about Profiteers?
* Big Mess in Tennessee: Clean Coalers Got Some 'Splaining to do
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