No. of Recommendations: 12
Was there a transfer of wealth away from middle America

The way the loss of equity works, as far as I can tell is this:

It never really existed. Because of the ludicrous way we compute market cap, all outstanding shares are valued the same as whatever the last trade price was. This is a fallacy -- all shares COULD NOT be sold at that price. If even 1% of GE's shares traded in a panic sell, it could easily drive the price down a substantial amount, I would guess. The best way to know the true value of a company is by a private buy-out pricing. That's the price at which an entire company could be bought. Stock price-based market cap is not a real measurement. Thus, much of the "lost equity" was simply an artifact of millions of shares being priced at an unreasonably high price during the last stage of a mania.

-hack
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