The closest direct analog is a crash--if I go from being able to buy one share for one dollar to being able to sell my one share for one penny, one can see this as the value of cash going up 100X.
For this to work you need for basically all financial assets to crash, not just some particular stocks. Besides, we still have the problem of the unit of measurement. If you want to measure your wealth in consumables (say, cans of beans) then for "unlimited" losses from long positions you need not only a financial crash, but also cans of beans becoming really really cheap. This is.. unlikely.
All in all, there is a real asymmetry between going long and shorting. Trying to construct imaginary situations in which you could lose a lot from being long isn't terribly helpful.
because you invested in A and got a 2X return, you missed out on investing in B, where you would have gotten a 2000X return. This is a profoundly unhealthy way to view markets.
I think it is the correct way to view the markets once you add risk management. If the probabilities of getting those returns for A and B were the same (and the distributions were shaped the same), you indeed missed out greatly.
This is.. unlikely.
Yeah, basically the only scenario I see is cans of beans becoming very cheap in terms of ammunition for unethical reasons.
I think it is the correct way to view the markets once you add risk management. If the probabilities of getting those returns for A and B were the same (and the distributions were shaped the same), you indeed missed out greatly.
Agreed--I'm making the assumption that such comparisons are made retrospectively instead of prospectively, and thus are implicitly ignoring risk.
This thread is for asking any questions that might seem obvious, tangential, silly or what-have-you. Don't be shy, everyone has holes in their knowledge, though the fewer and the smaller we can make them, the better.
Please be respectful of other people's admitting ignorance and don't mock them for it, as they're doing a noble thing.