In the Blink of an Eye

By -

I’d like to discuss an important and subtle fact about this chart:

slopechart AMZN

As you might guess, the chart is recent price activity in Amazon (AMZN). The stock hit a lifetime high only a couple of weeks ago, but since then it has lost about a QUARTER OF A TRILLION DOLLARS in market cap.

Now, experiences has shown that most folks have trouble grasping where the money “went.” I think it’s because they apply everyday thinking to asset devaluation. If you have $300 of cash sitting around your house, and then there’s only $200, the question becomes: where’d the $100 go? Did someone take it? Was it stolen? Misplaced? Where did it go? But everyone agrees – – it went SOMEWHERE. Because it was here a minute ago. And now it’s nowhere to be seen.

That isn’t the way with assets like equities, however, because they have absolutely zero value except the value that people agree they have. In other words, it’s all just an agreed-upon fiction. There’s no reason Amazon as a company should not be “worth” 50 trillion dollars. There’s also no reason it isn’t worth $0.00.

So where’d the quarter trillion bucks go? They didn’t go anywhere. Because they were never here in the first place. It was just a collective figment of imagination. There isn’t a quarter-trillion bucks “sitting on the sidelines” (God, I despise that phrase) waiting to go into other assets. The value simply doesn’t exist anymore, and the people of Earth are, on the whole, a quarter trillion dollars more poor than they used to be.

If the only stuff that has solid, non-zero valuable are the things which sustain life, well then, food, clean water, and to a lesser degree, depending on where you live, shelter, are the only things worth anything at all. Stuff like Amazon is just something we humans made up.