Bull and Bear Markets

[Bubblesofearth]

No it isn't. it's listed separately as equity.

BoE

OMG!

GS
EDIT: Sorry, that's a bit cryptic, but please read a basic text on double-entry accounting...

Not cryptic at all, just patronising.

https://www.bankrate.com/loans/small-bu ... es-equity/

Key takeaways

Assets are quantifiable things — tangible or intangible — that add to your company’s value
Liabilities are what your company owes to others, whether that’s an investor or a bank that issued a loan
Equity is everything left when you subtract liabilities from assets, and it represents the owners’ value in the company
To balance your books, the accounting equation says assets should always equal liabilities plus equity

BoE

[GoSeigen]

OMG!

GS
EDIT: Sorry, that's a bit cryptic, but please read a basic text on double-entry accounting...

Not cryptic at all, just patronising.

https://www.bankrate.com/loans/small-bu ... es-equity/

Key takeaways

Assets are quantifiable things — tangible or intangible — that add to your company’s value
Liabilities are what your company owes to others, whether that’s an investor or a bank that issued a loan
Equity is everything left when you subtract liabilities from assets, and it represents the owners’ value in the company
To balance your books, the accounting equation says assets should always equal liabilities plus equity

BoE

Yah, so was your comment patronising.

The idea that a company's equity is its asset is just arrant nonsense. Sorry.

At least you have quoted something sensible now, so I guess we are finally in agreement.

GS

[GoSeigen]

dealtn is mixing up the act of transacting a share transfer with another party and the meaning that ownership of that share carries.

Yes the transaction of parting with your cash and acquiring the share in a secondary market does not involve the company directly, as it does in the primary market.

But the consequence of the transaction is identical: you hold a security which entitles you to a share of the company's current and future assets; equivalently, the capital that is funding the company is now no longer that of the seller but is yours.


Sorry, but equity, shares, stock of a company are not its assets as claimed in the quoted website above. They also by convention are not listed in the liabilities section of a balance sheet but separated out; nevertheless they are a claim on the company just like the other liabilities, not an asset of the company.

Aside: I don't think liveflow.io should be treated as a source of financial (or any other) education. The text on the site appears to be a honeypot to attract visitors to purchase the software which is being promoted. I'd venture to say the software is probably worthless too, but I can't be bothered to check.

GS

[Arborbridge]

None of which has much chance of helping the OP!

The theory of buying shares when companies in the market are falling over themselves to borrow may be sensible, but also begs the question - how would one know when that was? And there is one snag: companies also borrow when they are desperate and on the point of expiring!

Buy when blood is on the floor and every one has rushed for the exits? Again, how would you know when that really is?

You may as well look at various market charts because that does a quick overall view of what is happening - but there is still a major flaw, just as there is with "blood on the floor" - I've seen many a beginning of an uptrend turn into a further down trend.

However, given that one might get at least some idea of the state of the market from a medium or long term chart, you could then apply the good old "pound cost averaging" - which is just a fancy way of saying: "spread your purchases over a period of time" (how long is up to you!)

Good luck. If you find the answer, keep it to yourself because as soon as the secret is "out" it won't work anymore


Arb.

[GoSeigen]

None of which has much chance of helping the OP!
[...]
Good luck. If you find the answer, keep it to yourself because as soon as the secret is "out" it won't work anymore

To be fair to @vand he did write:

"[...]if you have no way to know reliably when bear markets are over (and nobody does) then you would do take up the next best option, which is to remain in the market for a long period of time so that you benefit from real productivity, growth and cashflow returned, and not just shorter term price movements."


Personally I strive constantly to find the right time to buy my stocks (meaning to buy them at a good price obvs) and so I hope I am helping set stock prices at the right level. I am not an EMH adherent. I do think most investors are rational, but I hold that it is an emergent property of a group of rational investors making a market along with the usual set of newbies, forced buyers/sellers and clueless idiots, that the actual prices can be often significantly "wrong". So someone with a modicum of skill can find good opportunities. It's not for everyone but I enjoy the challenge.

GS

[Dod101]

You only need to look at any company Balance Sheet and you will find that equity is included as a liability.

Dod

No it isn't. it's listed separately as equity.

BoE

Yes it is. It is listed like many other items (mostly reserves of one sort or another) on the liability side of the Balance Sheet. The Balance Sheet contains on the Liability side a list of (guess what?) liabilities and on the other, the Asset side, a list of how these liabilities have been invested, in everything from buildings and machinery to goodwill.

Dod

[Dod101]

No it isn't. it's listed separately as equity.

BoE

OMG!

GS
EDIT: Sorry, that's a bit cryptic, but please read a basic text on double-entry accounting...
EDIT 2: The essential difference between liabilities and equity is that liabilities are amounts due from the company to third parties, while equity is amounts due to company's owners, the shareholders. They are both obligations of the company, whereas assets are obligations of other parties to the company. The earlier identity (equation) expresses the mathematical requirement that liabilities and assets are equal -- a corollary of double entry system.

In retrospect, the best thing on the financial front that happened to me was a crash course in double entry bookkeeping from an accountant friend of mine who wanted me to take over as treasurer of a charity where he wanted out of the job. Stood me in very good stead in my business career and in interpreting company accounts. Surprising how many people do not understand even the basic principles. It is not difficult though if you have a modest head for numbers.

Dod

[Bubblesofearth]

Yes it is. It is listed like many other items (mostly reserves of one sort or another) on the liability side of the Balance Sheet. The Balance Sheet contains on the Liability side a list of (guess what?) liabilities and on the other, the Asset side, a list of how these liabilities have been invested, in everything from buildings and machinery to goodwill.

Dod

If I buy a house with a mortgage I can put the house on the asset side, the mortgage on the liabilities side and the difference between the two as equity (or net assets). That equity is only a liability if I think of it as a liability to myself, i.e. I owe myself the net value of the house.

Similarly, shareholders are owners of a company so you can look at equity as net assets they owe themselves (to balance the books) but it's very different to liabilities to other parties.

Looks to me simply like a method of accounting. Clearly everyone else sees it differently but I'm fine with that.

BoE

[GoSeigen]

Yes it is. It is listed like many other items (mostly reserves of one sort or another) on the liability side of the Balance Sheet. The Balance Sheet contains on the Liability side a list of (guess what?) liabilities and on the other, the Asset side, a list of how these liabilities have been invested, in everything from buildings and machinery to goodwill.

Dod

If I buy a house with a mortgage I can put the house on the asset side, the mortgage on the liabilities side and the difference between the two as equity (or net assets). That equity is only a liability if I think of it as a liability to myself, i.e. I owe myself the net value of the house.

Similarly, shareholders are owners of a company so you can look at equity as net assets they owe themselves (to balance the books) but it's very different to liabilities to other parties.

Looks to me simply like a method of accounting. Clearly everyone else sees it differently but I'm fine with that.

BoE

Wow, we have agreement at last: equity is not an asset but an amount that represents how much of the assets belong to (i.e. are owed to) the shareholders (owners of the company) and so quite logically belongs on the liability side of the BS. A rare achievement on a discussion forum.

Welcome to standard accounting practice!


GS

[dealtn]

Yes it is. It is listed like many other items (mostly reserves of one sort or another) on the liability side of the Balance Sheet. The Balance Sheet contains on the Liability side a list of (guess what?) liabilities and on the other, the Asset side, a list of how these liabilities have been invested, in everything from buildings and machinery to goodwill.

Dod

If I buy a house with a mortgage I can put the house on the asset side, the mortgage on the liabilities side and the difference between the two as equity (or net assets). That equity is only a liability if I think of it as a liability to myself, i.e. I owe myself the net value of the house.

Similarly, shareholders are owners of a company so you can look at equity as net assets they owe themselves (to balance the books) but it's very different to liabilities to other parties.

Looks to me simply like a method of accounting. Clearly everyone else sees it differently but I'm fine with that.

BoE

But you are looking at the company balance sheet not the balance sheet of one of its owners. So if you can see that the equity from the perspective of the owner is an asset then it followers from the perspective of the company then the equity capital, like other forms of capital is a liability.

Using your example of a mortgage being a liability to you do you think that label also applies to the lender? It doesn't. For them it's an asset. That's how double entry accounting works. Your confusion appears to be an inability to distinguish between the perspective of the company and the owner(s).

[Dod101]

Yes it is. It is listed like many other items (mostly reserves of one sort or another) on the liability side of the Balance Sheet. The Balance Sheet contains on the Liability side a list of (guess what?) liabilities and on the other, the Asset side, a list of how these liabilities have been invested, in everything from buildings and machinery to goodwill.

Dod

If I buy a house with a mortgage I can put the house on the asset side, the mortgage on the liabilities side and the difference between the two as equity (or net assets). That equity is only a liability if I think of it as a liability to myself, i.e. I owe myself the net value of the house.

Similarly, shareholders are owners of a company so you can look at equity as net assets they owe themselves (to balance the books) but it's very different to liabilities to other parties.

Looks to me simply like a method of accounting. Clearly everyone else sees it differently but I'm fine with that.

BoE

I am simply telling you how compan accounts are drawn up. How you see it is entirely up to you.

Dod

[Bubblesofearth]

But you are looking at the company balance sheet not the balance sheet of one of its owners. So if you can see that the equity from the perspective of the owner is an asset then it followers from the perspective of the company then the equity capital, like other forms of capital is a liability.

Using your example of a mortgage being a liability to you do you think that label also applies to the lender? It doesn't. For them it's an asset. That's how double entry accounting works. Your confusion appears to be an inability to distinguish between the perspective of the company and the owner(s).

Who, or what entity, has the liability on the other side of my home equity?

If I purchase a BTL property then it's the same question. However, if I set up a company to purchase the BTL through (maybe for tax purposes) then we can attribute the liability to the company. Fine, but there's no material difference (apart form the desired tax benefits) from purchasing the BTL without first creating a company. Like I said, it's an accounting practice.

BoE

[dealtn]

But you are looking at the company balance sheet not the balance sheet of one of its owners. So if you can see that the equity from the perspective of the owner is an asset then it followers from the perspective of the company then the equity capital, like other forms of capital is a liability.

Using your example of a mortgage being a liability to you do you think that label also applies to the lender? It doesn't. For them it's an asset. That's how double entry accounting works. Your confusion appears to be an inability to distinguish between the perspective of the company and the owner(s).

Who, or what entity, has the liability on the other side of my home equity?

If you were ever to do the double entry book keeping on a personal basis then you would also have the liability. It represents the investment tied up in the house that were it not then it would be available to purchase alternative assets with.

Nobody needs to account for things that way though, nobody has a statutory duty to produce and publish their accounts. Corporates do and for them they have owners. So an asset of the company is financed through a liability to its owners (or other providers of capital) which the owners (rightly) see as their asset.