[tathougies]

Do people not expect the market to go down when business revenues have been forced lower due to unforeseen circumstances? The fact is a valuation made in November 2019 had no way of taking this into account.

This isn't to say whether or not it's a bubble, but I am surprised at the number of people who think that stock prices going down is due to financial health of companies rather than people attempting to sell stocks either in a panick or because they suddenly need the liquid cash on hand (due to job loss) and are thus willing to sell at a loss.

And regardless of their merits or demerits, share buybacks do increase actual earnings per share, which is one method to valuate shares. It's like, if there are four partners in a partnership and two decide to buy out the other's shares, their shares are now worth twice as much, assuming the corporation continues making revenue.

Then I hear about corporate debt and how that forces layoffs. The fact is companies are not going to retain employees when they cannot conduct business, regardless of cash on hand. It's not even a moral concern. Companies can simply layoff their employees and have them receive unemployment insurance. Even if they wanted to be 'ethical' and provide health insurance, the cost of a severance package with 18 months of health insurance is less than paying them and providing health insurance. From a corporation's perspective, irrespective of how much cash or debt they have, layoffs are simply superior.

[01100011]

> I am surprised at the number of people who think that stock prices going down is due to financial health of companies

The financial health of many companies is significantly affected by virus mitigation strategies. Companies that were healthy in January may be on the brink of insolvency in June. The market is pricing that in to some extent.

[tathougies]

Yes, this is due to the virus, not the previous financial health of the companies. YOu have companies in danger of folding because creditors may be hesitant to give fixed-term loans to a company for which no one can determine a business resumption date. That does not reflect on the pre-virus financial health of the companies. Any company would find trouble with liquidity when its business model has been suspended suddenly and indefinitely.

[zby]

"It's like, if there are four partners in a partnership and two decide to buy out the other's shares, their shares are now worth twice as much, assuming the corporation continues making revenue." - I don't understand how you calculate that. Let's say there is a company with 4 shareholders with equal shares and with discounted future earnings of $2 million plus $2 million of cash. That makes the company worth $4 million and each share worth $1 million. The company then buys two shares for the $2 million in cash it has. That makes the company worth $2 million (it has no more any cash and the discounted future earnings are worth $2 million) - and the two shares left are each worth $1 million - exactly like before the buy out.

[tathougies]

Companies capital reserves often don't count in valuations. It's just the discounted future earnings. Cash sitting in a company's coffers would often count against it, since the rate of return on capital would be lower (larger denominator), and investors are seeking a higher rate of return.

The fact of the matter is, companies should not keep 'emergency cash reserves' enough to operate for six months. The money should be returned to shareholders. Shareholders and other investors should keep liquid cash reserves for emergencies. Then, when companies face emergencies, they should issue new stock to the markets, and the saved up emergency capital can be used. That leaves individual share holders and potential shareholders to decide the fate of companies, which seems more in the spirit of democracy.

[lotsofpulp]

You have to factor in expected growth, divvied amongst fewer shares.

[marnett]

> because they suddenly need the liquid cash on hand (due to job loss)

How much market volume do you think is attributed to retail investors?

[tathougies]

About 7% on average I believe but I can't know about on non average days, like the past ones have been.

I know a lot of people who logged in to their accounts last Monday who never normally to sell shares and hold cash until the market bottoms. I'm guessing the retail volume in the past week has been higher than ever.

Even barring retail investors telling brokers to sell shares, there are all sorts of reasons consumer behavior can force share sales including increased expectation of withdrawals by banks, people not contributing as much to 401k. Defined allocation mutual funds rebalancing, etc. Also, today a lot of low cost brokerages sell trades to algotraders for fulfillment, so an order for the sale of 1 share of a consumer investor can end up accounting for more in trading volume

[afjl]

Hm, not OP but I'm guessing 5-10% maybe?