From: Dan Fabulich (dfabulich@warpmail.net)
Date: Fri Sep 13 2002 - 13:52:18 MDT
gts wrote:
> Dan wrote,
>
> > So, the reason why clarity has been so hard to come by is because
> > the language in which we discuss this is very vague. In the way
> > Crocker and I are speaking, saying "The value of ownership is in
> > selling the stock" is a non-sequitur. If you think it makes
> > sense, then you don't understand the definition we're using for
> > "the value of ownership."
>
> It's not really a non-sequitur. The problem comes from your limited
> definition of "value." You limit your definition to what is known in
> economics as "utility value." It is true that there is no *utility*
> value in owning stock (one cannot for example drive or eat a stock
> certificate) but the stock is nevertheless valuable to the owner for
> investment purposes.
I hope you don't give this answer to anyone else who asks this question,
because, as I've said before, you don't seem to understand the question
being asked. ;) You know the answer, and I've managed to get the answer
out of reading what you and others have been saying, but you don't
actually understand the question.
Part of the reason why it's been so hard for you to understand the
question, I think, is because you've insisted on not using the language of
the question; here, for example, you're assuming that I mean utility when
I say "the value of ownership." But that's *not* what I mean.
For example, you can't eat a hammer, either. But a hammer gives you a
capacity that would wouldn't have without it; you can make money with a
hammer without selling it. There is a value in *owning* the hammer, even
though it's not a utility value. Now, I could also sell the hammer and
make cash off of it. But *that* value is not part of the value of
ownership. Rather, other people would buy a hammer from me because they
see the value in owning it.
I know very well that stocks have no utility value, but the question asked
you to show how a stock is like a hammer, that's valuable just in keeping
it, not merely in selling it.
I'm prepared to go to the mat on the point that the value of ownership
*makes sense* and can provide a good and satisfying explanation (perhaps
even the best explanation) of what's going on in a given market, even in
the stock market. ;)
> > If I understand correctly (I *have* learned quite a bit from this
> > thread!), in fact, the value of the owning stock is in the
> > *capacity* to make dividends, *even if you never actually do so*.
>
> I would rephrase that as follows: "The value of owning the stock in the
> capacity to participate in profits, though dividends and/or capital
> appreciation."
Capital appreciation is just increased demand for your capital. It
doesn't increase the value of ownership.
> There is by the way value in capital appreciation even if one choses
> *not* to sell stock. One can for example place one's stock on margin,
> enabling one to purchase more stock, or even to buy personal property
> with actual utility value.
Yes, but these are all contingent on the fact that stock ownership has
value. You couldn't put it on margin if stock wasn't like a hammer (in
that you can get dividends out of it), and nobody would be willing to buy
it if it didn't have value of ownership. Same goes for other creative
uses for stock.
> > The idea is that if I owned the entire stock of the company,
> > I *could* take its entire future profits, as dividends, all to myself.
>
> Yes, though you needn't take it as dividends, per se. You could name as
> yourself as an employee and take the profits as income, for example.
Well, the point was that I could take all the profits; it doesn't really
matter how.
> The emphasis that you and Lee have on dividends is misplaced.
Dividends are the ordinary means of taking a company's profits and assets.
The stock gives you access to the company's profits and assets (even if
you never collect). That's the value of ownership of the stock.
-Dan
-unless you love someone-
-nothing else makes any sense-
e.e. cummings
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