From: Extropian Agro Forestry Ventures Inc. (megao@sk.sympatico.ca)
Date: Mon Sep 09 2002 - 18:27:39 MDT
Stocks represent a factual value of the underlying asset which is determined
solely by the value placed on the intensity of the confidence the owner places
on it multiplied by the conscensus or lack of placed on the asset by others.
People place high value on the right to exert power over others.
The more value per share X the more shares means the more rights to dominate
others.
The market is every bit the roman circus complete with christians and
barbarians and blood sports.
What does the market supply?... entertainment
Dan Fabulich wrote:
> So, I've been wondering something that I'm hoping one of the clever folks
> here can answer for me. I believe I have some false assumptions about the
> stock market, but I don't know what they are.
>
> When I buy stock in a company, I get some controlling interest in the
> company (normally, I get to vote on shareholder resolutions and whatnot),
> right? I'm having a hard time understanding how and why that's valuable.
>
> In my understanding of value, there are only two kinds of value: goods may
> be purchased for their intrinsic value to the purchaser, and goods may be
> purchased for their moneymaking value. (Here, I use "intrinsic value" to
> simply mean non-economic value.)
>
> Examples of goods purchased for their intrinsic value might be toys,
> housing, and medicine. Examples of goods purchased for their economic
> value might include tools, vocational education, and interest bearing
> loans. (Of course, the distinction is rarely stark; sometimes you buy a
> nice house so as to sell it when demand for the intrinsic value of your
> house rises, education may be had for the pleasure of it, etc.)
>
> [Here's where I'm especially unsure of my assumptions.]
>
> Now, it doesn't seem to me like shares of a firm have any intrinsic/
> non-economic value worth considering (?), but rather people only purchase
> them with the intention of making money with them.
>
> But, unlike tools that you can use to build things that make money, or
> education that you can use to increase your productivity or expand your
> money-making capabilities, or loans which make money in interest, [by
> enabling other people to buy tools/education/capital, improving their
> money-making capacity and passing some of the difference on to you,]
> stocks don't appear to *do* anything that make them worth paying for.
>
> Indeed, the primary way people intend to make money off of stocks is by
> selling them. But this just begs the question as to why anyone would want
> to buy them in the first place!
>
> Of course, you CAN make money off of a stock by receiving a dividend.
> But it's well understood that you don't buy stocks *so that you'll get a
> dividend*; instead, you buy stocks so that you can reap the rewards when
> their price goes up (ie, when other people are more interested in buying
> your stock). The reward of owning stock is therefore realized only when
> the stock is sold.
>
> Even if dividends *were* the only way in which stocks could make money for
> their bearers, then there's a huge number of stocks out there whose value
> cannot be explained, because they do not offer dividends and do not intend
> to offer dividends anytime soon, if ever. If dividends were the only way
> a stock could benefit its bearer, these no-dividend stock prices would be
> totally inexplicable.
>
> If stocks have no intrinsic value, then stocks are radically different
> from other kinds of investments, even from other non-loan investments like
> real estate, where it's presumed that the real estate itself is worth
> having, for intrinsic reasons. Instead of trading stock, we might as well
> be trading certificates for chewed gum or anything else with no intrinsic
> value.
>
> This last conclusion seems so wrong that I'm sure I must be missing
> something... but what? Am I overlooking the intrinsic value of voting in
> shareholder meetings? (I suppose it could give people pleasure to know
> that they're partially controlling the resources of a big business, even
> if they don't get any of that money for themselves...?) Or am I
> overlooking some other way, besides dividends, that stocks could make
> money for shareholders?
>
> In other words, what do stocks supply?
>
> And, as a related question: why would a firm's shares be worth more, all
> else being equal, if the firm's profits increase?
>
> -Dan
>
> -unless you love someone-
> -nothing else makes any sense-
> e.e. cummings
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