The other part, and this took me forever to realize, is how much "expectation" matters, in the sense of information. If on Monday, I flip a fair coin to decide whether or not to dissolve my business, and then tell you what the coin landed on on Wednesday, then the amount you'll pay for a share in my company on Tuesday is going to be incredibly different from what you'll pay Thursday. Noting for the business changed between those days. Only your perception changed, but it's insanely important. That's a reason swings can happen so near-instantly. The company's finances don't change that quickly, but the information available to investors does change that quickly (like on an earnings call, or after the release of an investigative report).
So in 2008, the near future was weighted heavily and not rosy ("intrinsic" values go down), while investors realized they'd been wrong about their expectations (market prices go down further).
I'd love to know what insider info they have passing around because I don't see the people losing their homes due to a failure to pay rent buying new cars for Christmas.
Its that or capital realizes the working poor are so divorced from their economy that they can ignore the destitution of the muggles while their fantasy numbers game chugs along in perpetuity. Which it probably can. Not like anyone owns a pitchfork anymore.
Put differently, we shut down ~20% of our economy. We'll probably restore most of that - around 15% - retail, restaurants, gyms - and our economy was doing so well that losing the remaining 5% is a blow we can take - most of those will migrate to other industries that were hiring (e.g. Amazon). 2021 will look more like 2013 (a recovery in progress) than like 2017 (a boom) or 2009 (a recession).
I don't follow. Could you explain how what I said implies that? And what time scale are you referring to when you say "rapid" and "near instant?"
The subsequent crash and economic calamity was focused on home owners, and existed within the financial system more broadly, not just stocks/equities.
Maybe a better example is the dot-com bubble - many investors thinking that “the Internet was going to take over” etc etc pets.com. So the thesis at the time was tremendous growth rates for questionable business models. Once it was evaluated as a “bubble” =~= overvalued =~= these set of companies will never make back there money -> a stock price correction occurred.
What happened in 2008 is that investors suddenly realized that a hell of a lot of companies were taking way more risk than they thought, and decided to cut their stock allocation to avoid those risks.
I'd like to see how this concept would explain 2008. If it can, it further strengthens the thesis.