On the day after the stock went down $3, the company made the same number of wireless phones as on the previous day. So in reality, the next day, there is more wealth in the world (one day worth of phone production) than the previous day, even though the conversion ratios (from one form of wealth to another) changed.
In the long term (measured by years) you are, overall, considering the aggregate of companies, right. In this country, with our low levels of corruption (relatively - Scandanavia and Germany are better on THAT), really pretty excellent (relatively) regulation of business, and pretty amazingly great capital markets organization (athough we also have a spendthrift culture, and a pretty lousy bottom 25% of the population on all sorts of measures), we tend to turn things around pretty fast. Usually.
In the short term, there is a destruction of spendable money. Some people cannot repay their margin or other debts. Some people reduce their spending. Sometime radically. (This is now happening, pretty dramatically, among the obnoxiously bonus rich earners on Wall Street -- almost all of whose earnings is in those bonuses.) It will happen less dramatically, and less quickly, all over the country, if stocks remain much lower than they were around their peak.
Doug |
