And thus, in keeping with my policy of “questions only”, I will thank those who have defeated my ignorance, and finish by asking if the following is true:
The price of a stock increases because [ul][li]stockholders expect to receive benefit in the form of dividends or other earnings distributions, or[/li][/quote]
**Don’t forget the value of the stock may increase without direct benefit to the owner. You need not recieve direct compensation for the stock to benefit you. If the value of the stock increases, you become the owner of something that is more valuable than it was when you purchased it without recieving the actual dollars.
No, that’s completely untrue. The utiltarian value inherent in the shirt doesn’t change because someone takes the shirt away from you. The value of the shirt is still in the shirt, it’s only that you no longer posses the shirt, and therefore can’t make use of the value. You’re confusing “ability to use” with “inherent usefulness”.
No, I’m saying that there are different kinds of “value”. As I already said in a previous posting, some value is inherent in an item, and some value exists only by agreement. The value of money exists only by agreement, do you dispute that? The “value” that money has was created by people; the very concept of money was created by people, fercrisakes. Before organized societies came into being, the very concept of money – and hence the value of money – didn’t even exist, it’s entirely a creation of intelligence and people and society.
But long before there was any semblance of society, a rock was useful (as John Mace pointed out). Food was useful. The usefulness of such things does not depend on a group of people getting together and saying, “Ok, we’ll all agree that we’ll attach some value to these things.”
Christ, this is such a simple, basic, obvious principle, why is it so hard for you people to just see it?
No, that’s not true at all. You are not making a distintion between the inherent usefulness that is a property of an item, and the ability of other people to take that item away from me. That the item can be taken away doesn’t remove the usefulness of the item, it just means that it’s no longer in my possession. Things like stocks and currency, however, just have no usefulness that resides in the item, their entire usefulness derives only from the agreement with other people.
All you’ve established is that the usefulness of an object can depend on the environment and circumstances. I have never and would never disagree with that. My point, yet again, pertains to whether the value of something derives solely from an agreement between people, or whether the object could possibly have a value that is completely independent of other people. That you live in an environment where a shirt is useless to you has nothing to do with any agreement among people, it just means it’s hot where you live.
I notice that you’ve ignored my fill-in-the-blank question in post #74. Does that mean that you concede that there is nothing meaningful that can be put into that blank?
Obviously, not much. But as I responded already, that just means that the usefulness of an object can depend on your environment and circumstances. That you have no need for a shirt is because of your environment, not because any agreement among people has changed.
This is just demonstrably incorrect. I can use a rock to kill a rabbit. I can do that even if I’m the only person on Earth. The rock has value and usefulness that is completely independent of any other person. If I have a bow and arrow, then the usefulness of the rock is probably severely reduced. But it’s been reduced because of something else in my environment, not because of anything related to people.
Are you really saying that – hypothetically – if you were the only person left on Earth that nothing would have any value to you? Nothing would be useful? You could eat an apple, and you’d get no nutrition from it because there aren’t any other people around to agree that the apple has nutrition? That’s rather silly. The fact that some objects have value that is completely independent of any agreements with other people, or even whether there are any other people, is as obvious as anything can be.
No, I’m making an extremely simple point that you fail to grasp. There is an inherent difference between the value that can be derived from an object in and of itself, and the value that can be derived only as a result of agreements among people. Go read what xtisme wrote in post #59.
No, because the shirt example fails that test also.
When you own stock, you own a piece of a company. Sure that requires other people to agree that you own it, but what if no one agrees that you own the shirt? It’s yours only so long as no one takes it from you. Same with ownership in the company.
You cannot own or use a thing if other people don’t agree to let you. Not stock, not a company, not a shirt.
Your argument might make sense if there were only one person in the world, but then ownership is meaningless, and of course there would be no such thing as stock.
I grasp the concept. I just don’t understand why you can’t grasp the concept that a piece of paper that says “good for one rock” is nearly equivalent as having the rock itself, provided you are living in an environment where such a contract is enforced. I also grasp the concept that having such a paper is inherently riskier than having the rock itself because there could arise a scenario where I am unable to cash out a rock when I need it.
I mean what is your point anyway? That stocks are worthless because you can physically touch them? That people shouldn’t invest in the stock market because in your mind stock has no tangible value? Part of the risk of investing includes the possibility that the company you invest in or the nation it resides in may undergo some catastrophic collapse. Foreigners invest heavily in the US because we have a stable economy and a stable government and they expect that will continue.
So yes, I get the concept that a shirt has inherent “value” because if nothing else, you can wear it. But since I also live in an advanced society, I can also take a risk and buy shares in the shirt making company and hopefully profit from the fact that they are making a product that so many people find useful.
The point that I was trying to make is that unless someone agrees to buy your stock, that stock, and your ownership, is useless. You can’t go to the company and demand, as part owner, your share of the profits. Nor as a part owner could you demand free soda from Coke or a free copy of Windows from Microsoft. What’s the usefullness is owning a tiny part of a company if you can’t get anything from that ownership?
My question, is why does it matter if that shirt making company does well or not? Basically, if owning stock really meant owning a part of the company, then you could do something with that ownership, but of course, you can’t. So you can claim to own something all you like, but what good does it do you? Stocks aren’t worthless because you can’t touch them, stocks are worthless because their value is a figment of everyone’s imagination.
If that question has not been answered to your satisfaction thus far in this thread, then my only suggestion to you is to stick to investments in tangible assets, such as precious metals or real estate. If you believe their value is a figment of everyone’s imagination, no amount of rational explanation will ever sway you.
The hell you can’t. You can sell the stock or trade it. If you own a great deal of stock you become a controlling holder and actually have a say in the future of the company.
Not true. Again, you ACTUALLY OWN A PART OF THE COMPANY. A company that offers stock to the public is owned by the public. You are part owner. There is a limited supply of the stock, usually in proportion to the value of the company or some percentage thereof. Your stock value increases as the company grows. If the company tanks so does the stock. Hopefully the stock increases in value so you have something that has MORE value in the future when you sell it and if you own enough you can actually control the future of the company.
How does that fall under ‘figment of imagination’?
Well, as fun as this has been, I’ve reached my limit. It’s clear that there are some people who just cannot grasp the simple distinction between a physical object that can be put to use, and a societal contract that only exists because of agreement. So I’m outa this one. I reached a solid agreement with one person (xtisme), which is rare enough around here to take comfort in.
From all this, my conclusion to the title question: no, it’s not “a hoax”. Just an artificial construct, like just about ANYTHING in organized society. It may look like “a hoax” because so many of the people participating (even enthusiastically participating) are doing so under a totally wrong idea of what’s going on, and losing their shirt (with or without intrinsic value) at it; and even many of the ones making money are not really sure of how it truly goes.
I think the irritation comes when we use phrasings like “hoax” (with its connotation of deliberate deception) and “figment of imagination” (with its connotation of irrationality), or even “instrinsic value”. In capitalism, the economic value of a good, service, or exchangeable instrument is the only value, and it’s assigned by the market and measured in price.
*&^%$ twice in a week I post halfway through my own article…
(continued) That does not make market-value (not just of stock but of goods, services, and even currency) nothing but smoke-and-mirrors. The market is an emergent phenomenon of human behavior in complex societies, so it’s as “real” as any other social construct.
Stocks have value because we agree on it – yes. But in this society, in this place and time that IS value; classifying it between “intrinsic” or “agreed upon” is angels on heads of pins.