Where does the stock go in a collapse?
Just before a crash or at the start of the crash most of the smart money would have gotten out, the remaining technical traders would be out by the time the market has dropped 10 to 15%, and some of them would be shorting their positions by now.  Most long-term buy and hold investors would stick to their guns and stay in for the long haul. Some will start to get nervous and have sleepless nights when the markets have fallen 30%+ and look to get out as well. Others stay in until they cannot stand it anymore. And some will stick it out throughout the downturn. So who are the buyers at this stage? Some are the so called bargain hunters that buy when the market has fallen over 30% (only to sell again when it falls another 20%), or maybe buy more (because they think they are dollar cost averaging and will make a packet when the price goes back up - if and when it does). Some are those with stops covering their short positions, whilst others may be fund managers and individuals looking to rebalance their portfolios. What you have to remember during both an uptrend and a downtrend the price does not move straight up or straight down. If we take the downtrend for instance, it will have lower lows and lower highs (that is the definition of a downtrend). See the chart below of the S&P 500 during the GFC falls.  As you can see just before it really started falling in Jan 08 there was ample opportunity for the smart money and the technical traders to get out of the market as the price drops below the 200 MA and it fails to make a higher peak. As the price falls from Jan 08 to Mar 08 you suddenly start getting some movement upwards. This is the bargain hunters who come into the market thinking the price is a bargain compared to 3 months ago, so they start buying and pushing the price up somewhat for a couple of months before it starts falling again. The reason it falls again is because the people who wanted to sell at the start of the year missed the boat, so are taking the opportunity to sell now that the prices have increased a bit. So you get this battle between the buyers (bulls) and seller (bears), and of course the bears are winning during this downtrend. That is why you see more sharper falls between Aug to Oct 08, and it continues until the lows of Mar 09. In short it has got to do with the phycology of the markets and how people's emotions can make them buy and/or sell at the wrong times. "If we can agree that 2010 was closer to the low of 2009 than 2007 then the rich did all the buying while the super-rich did all the selling. http://www2.ucsc.edu/whorulesamerica/power/wealth.html Looks like the rich cleaned up during the Tech Crash too, but it looks like the poor lost faith. That limited data makes it look like the best investors are the rich. Market makers are only required by the exchanges to provide liquidity, bids & asks.  They aren't required to buy endlessly. In fact, market makers (at least the ones who survive the busts) try to never have a stake in direction.  They do this by holding equal inventories of long and shorts.  They are actually the only people legally allowed to naked short stock: sell without securing shares to borrow.  All us peons must secure borrowed shares before selling short. Also, firms involved in the actual workings of the market like bookies but unlike us peons who make the bets play by different margin rules.  They're allowed to lever through the roof because they take on low risk or near riskless trades and ""positions"" (your broker, clearing agent, etc actually directly ""own"" your financial assets and borrow & lend them like a bank). http://www.finra.org/web/groups/industry/@ip/@reg/@notice/documents/notices/p004001.pdf This is why market makers can be assumed not to load up on shares during a decline; they simply drop the bids & asks as their bids are hit."
If anyone could reliably pick winners, they could make more money by investing in those winners than by selling their advice. Generally, when someone sends you unsolicited hype about stocks, that's because they're trying to pump the price up so they can dump their own shares before it collapses again. Also note that, these days, it's remarkably easy to run the scam where you sell half your customers buy advice and the other half sell advice on the same stock. Each time, some of the customers drop out in disgust (half, minus whoever decides to give you another chance) and the rest pay you for the next iteration. You can make a lot of money before you run out of suckers. That, all by itself, is good reason to be skeptical about anyone who doesn't publish their full history so it can be audited for such shenanigans. This is why Singapore's economy makes the most sense, the government has a huge sovereign wealth fund where the government actually owns a sizeable portion of the economy/businesses, i believe this is called 'socialism', but done through their stock exchange (and foreign exchanges too), and the returns go back towards people's social security accounts and also funds government programs.  Norway also does something similar. "Ditto mhoran_psprep.  I'm not quite sure what you're asking. Where does the money come from? When someone starts a bank, they normally get together a bunch of investors -- perhaps people they know personally, perhaps they sell stock -- to raise initial capital. But most of the money in the bank comes from depositors. Fundamentally, what a bank does is take money from depositors and loan it to borrowers. (Banks also borrow money from other banks and from the government.) They charge the borrowers interest on the loan, and they pay depositors interest on their deposits. The difference between those two interest rates is where the bank gets their profit. Where does the money go when you pay it back? As mhoran_psprep said, some of it goes to pay interest to the depositors; some of it goes to pay the bank's expenses like employee salaries, cost of the building, etc; and some of it goes as profit to the owners or stockholders of the bank. If you're thinking, ""Wow, I'm paying back a whole lot more than I borrowed"", well, yes. But remember you're borrowing that money for 20 or 30 years. The bank isn't making very much money on the loan each year that you have it -- these days something like 4 or 5% in the U.S., I don't know what the going rates are in other countries." The point i wanted to make is that you can't rule out war, countries conquered/stole from each other throughout all of history, the only reason we don't now is because of prosperity. Take that away and all bets are off.   The great depression hit all corners of the globe, what's going to happen to the american debt? Whoever bought that is going to want their money back. Is china going to stay friends? What about north korea, when they see countries around them failing, they don't seem too friendly even now. Russia? We don't know enough about their culture to know what their intentions are, to them the americans are just the same, building their military same as everyone else.  The wall-street crash of 1930s was based on speculation and stock investments, the amount of shit piled up, about to explode is so many times bigger. Also, people back then were more prepared for a depression, they were more self-sustainable and lived in communities.   Really, when the economic collapse happens, a huge amount of people are going to die, people with disabilities, those needing medication, morbedly obese etc. They represent a large proportion of the population and they are going to die off within weeks of the collapse.   Without a doubt it will be worse than the great depression. I don't care about the politics, i'm not even american for starters, survive through the shitstorm first. Remember that shares represent votes at the shareholders' meeting. If share price drops too far below the value of that percentage of the company, the company gets bought out and taken over. This tends to set a minimum share price derived from the company's current value. The share price may rise above that baseline if people expect it to be worth more in the future, or drop s bit below if people expect awful news. That's why investment is called speculation. If the price asked is too high to be justified by current guesses, nobody buys. That sets the upper limit at any given time. Since some of this is guesswork, the market is not completely rational. Prices can drop after good news if they'd been inflated by the expectation of better news, for example. In general, businesses which don't crash tend to grow.  Hence the market as a whole generally trends upward if viewed on a long timescale. But there's a lot of noise on that curve; short term or single stocks are much harder to predict. My understanding was that if a company buys back shares then those shares are 'extinguished' I.e. the rest of the shareholders now own a greater portion of the company. However, if there is only one share left, then the company could not buy it because doing so would extinguish it leaving the company without an owner. That result would run contrary to the requirements for an incorporated company in countries like NZ and Australia. "I bought 1000 shares of Apple, when it was $5. And yet, while the purchase was smart, the sales were the dumbest of my life.  ""You can't go wrong taking a profit"" ""When a stock doubles sell half and let it ride"", etc.  It doubled, I sold half, a $5000 gain. Then it split, and kept going up. Long story short, I took gains of just under $50,000 as it rose, and had 100 shares left for the 7 to 1 split.  The 700 shares are worth $79,000. But, if I simply let it ride, 1000 shares split to 14,000. $1.4M. I suppose turning $5,000 into $130K is cause for celebration, but it will stay with me as the lost $1.3M opportunity.  Look at the chart and tell me the value of selling stocks at their 52 week high. Yet, if you chart stocks heading into the dotcom bubble, you'll see a history of $100 stocks crashing to single digits. But none of them sported a P/E of 12." "Stock price is set to the price with the highest transaction volume at any given time.  The stock price you cited was only valid in the last transaction on a specific stock exchange. As such it is more of an ""historic"" value. Next trade will be done with the next biggest volume. Depending on the incoming bids and asks this could be higher or lower, but you can assume it will not be too far off if there is no crash underway. Simple example stock exchange:"