Not necessarily. Some companies never issue any stock-shares even for internal purchase. A sole proprietor is (usually) not a stockholder. Partners are (usually) not stockholders, they simply own an interest in the business.
Cool. Can you point me to a bank that offers a savings account with an annual percentage yield of 4%?
Not as hard as it seems, compound interest really adds up.
Save money- any money at all- and you’ll gradually start to get ahead.
The trick is to spend less than you earn, people have a hard time with it.
I worked low-pay jobs for a long time, then found myself in a place with a retirement plan.
I didn’t make much more per hour, and some was set aside before I saw it. When I left, I had enough to buy a home. Buy it outright, not make a down payment.
My basic pay rate when I left was less than $13/hr. You can work your way up from nothing if you try, it really is possible.
Sure, its possible. But as the saying goes, if you have a hundred dollars, making a thousand is difficult, if you have a million, making a thousand is almost inevitable.
Still, possible. The intelligent, talented and ambitious can do quite well. What about the rest of us?
If A buys a stock at $10, then sells it at $15 to B, who sells it at $20 to C, who is poorer? This trading is a positive sum game, not a zero sum game.
LinusK is correct that stock trading to a large extent is a game of perceptions. His pebble trading story is a classic example of a bubble, whereupon an asset with little intrinsic value is bid up to absurd heights.
But the stock market does play a role in wealth creation: it’s just that it does so indirectly. By bidding up the price of Apple stock, those enthusiastic about that company’s prospects enable it to acquire more resources for investment. A higher stock price enables a company to secure more bank loans. If the company wants to raise additional funds on the stock market, it can do so for cheaper.
But how powerful is this effect? How much do higher stock prices lead to greater investment, relative to other factors? That is an empirical question: it’s not one that can be settled in your armchair. Baker, Stein and Wurgler [1] provide the consensus as of 2001:
Ok. The paper quotes Barro (a conservative economist) and 2 studies by other prominent economists. For our purposes they are in agreement or at least I can’t see any contradiction above. All agree that stock market prices affect firm purchases of machinery and other forms of investment in statistically discernible ways. None claim that the effect is particularly large relative to other effects. None say the effect is de minimus. In short the stock market’s effect on firm investment “may not be a complete sideshow, but nor is it very central.”
So, yes, the stock market plays are role in capital allocation and wealth generation, but it isn’t an especially large one.
[1] When Does the Market Matter? Stock Prices and the Investment of Equity-Dependent Firms
Do the stupid, mediocre and lazy deserve to prosper?
That’s sort of the point…you can be ANY of those 3. You don’t have to be ALL 3. If you’re lazy instead of ambitious, well, sucks to be you and I’m not helping your sorry ass. And you wouldn’t deserve my help, either. See how that works?
Oh, yes, I’ve seen how it works. Don’t much care for it.
My point, 'luci, was that ambition is a CHOICE, not a condition of birth like the other two. If someone isn’t ambitious, then what business have I in trying to help them?
What do you mean they are all wealthier? At the end only the last guy has the million dollar pebble. If he paid for it, a million dollars comes from an account someplace else, distributed around the table. So, he has transferred his wealth.
Now if someone else also had a pebble, and he could find a sucker to buy it, he would get real wealth. At the expense of the sucker, of course, whose wealth would soon diminish when the pebble bubble burst.
The actual wealth creation piece of the market comes from distributing ownership of growing companies more widely, so that the shareholders get a piece of actual wealth creation through higher stock prices. But you seem to be only seeing the noise in the process.
I think the existence of homo economicus is a much more prevalent myth.
Nothing I can prove. Every man has his Gospel, that he preaches by word, by action, or in combination. Some folks, that Gospel is that there isn’t one.
And so it goes.
Yeah, that’s also a good one. The key sentence is that the US is capable of paying its debts because it’s the source of the dollars needed to pay them. Whatever those debts may be, however much they are. It’s wrong saying that paying off the debts creates inflation. It’s incurring them that does that.
Pebbles don’t pay dividends. Other things that don’t pay dividends: art, silver, antique furniture, land, and of course, gold. And not all stocks pay dividends. Only about half do.
But point’s the same: capital gains (not dividends) come from buyers, not from “the market”. People who hope to retire off capital gains from selling stocks are, in effect, saddling future generations with an expectation that those future generations will be willing to fund their retirements.
Yes, at least in the sense that no one deserves to be poor.
Where were you in my last thread? I’ve never understood the justification for taxing unearned income at a lower rate than earned income. We should want people to work. Work is the source of all goods and services, not to mansion wealth. Taxing people at a lower rate because they’re too rich to have to work makes zero sense to me.
I don’t quite follow this example.
If the price is doubling each time, then at the least the final buyer needs to inject half a billion dollars from outside the system to secure the pebble, right?
(And we’d need to know how many people are at the table to know how the rest of the party end up).
OTOH if you are making the point that we can value things however we like, then, sure, but obviously it’s meaningless if you can’t find anyone to buy your pocket fluff for a million shekels.
Even if a friend and I agree that my trainers are worth a million dollars, that’s meaningless too if my friend would not actually consider spending his life savings on buying them, or if I would sell them without hesitation for, say, 10k.
But that’s exactly wrong. There is no money in the market. The market is simply a mechanism for transferring ownership interests. Imagine a table. The table is “the market”. The seller has a bag a stocks. The buyer has a bag of money. The buyer and seller exchange bags, and each goes their separate way. What’s left on the table?
The market funds nothing; people do.
But the wealth does come from thin air. And it disappears back into the air when the market falls.
“Ambition is like a frog sitting on a Venus Flytrap. The flytrap can bite and bite, but it won’t bother the frog because it only has little tiny plant teeth. But some other stuff could happen and it could be like ambition.”
– Jack Handey
Sorry Voyager I see I have repeated your point.
Why don’t they? What do you propose be “done” with them? If you could restructure society the way you see fit to “deal” with them, what would you do?