Yes. In fact, 465 US banks had their actual future cash flows go to zero and were closed permanently. A great number of other companies also never recovered and filed bankruptcy and/or were sold off.

Partly, that's where the "discounted" part comes in. The further out a profit, the less it factors into today's price.

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).

This implies that Wall Street fully expects a total rapid recovery from 20-30% unemployment and near instant realization of demand for everything again in short order. Including planes, restaurants, vacations, tourism, etc.

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.

There may not be as many new cars for Christmas, but it's important to keep in mind that the US economy was doing extraordinarily well prior to the pandemic - with unemployment at 3.5%, the average person in the labor market was employed for more than 50 weeks out of a 52 week year - in fact, so many people were employed that companies were starting to have to raise the amount of money they offered to workers, because they couldn't find anybody desperate for a job.

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).

> This implies that Wall Street fully expects a total rapid recovery from 20-30% unemployment and near instant realization of demand for everything again in short order. Including planes, restaurants, vacations, tourism, etc.

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?"

I think it’s tough to say and tie it in directly. My understanding of 2008 is that the over valuations were tied in with residential Real Estate and the associated MBS’ (mortgage backed securities - the owners of the loans). Everything else was largely contagion and concern around the sanctity of the financial system.

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 is the fair market value of a specific company" is only part of how stocks as a whole get valued. Roughly speaking, investors have a roughly constant fraction of their money invested in stocks. As more money enters their pockets - via personal earnings, corporate profits, monetary and fiscal policy, etc - investors have to figure out where to park it.

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.

yes because if a company goes bankrupt it’s future profit goes to zero