Posts Tagged “stock market”

There.  I said it.

And I mean it.  Not that certain stocks are a ponzi scheme….the entire concept of the stock market is a ponzi scheme.

Think of all the people that work in industries related to the stock market……are you thinking?  There are newspapers, magazines, and entire TV channels that employee only people talking about the stock market all day.

And they all have no fucking idea what they are talking about.  They are so spectacularly wrong, even weathermen are more accurate than these people….and if weathermen are wrong you simply get wet.  When all these clowns are wrong the global economy is wrecked.

Let’s examine some fundamental truths about the stock market:

Stock shares are fiat money (ie. THEY ARE WORTHLESS): A company issues stock, but what is a stock?  It is simply debt, and they raise public debt (issue stock), because it is cheaper than bank debt.  If they could raise money cheaper simply by borrowing from a bank….they would.  They issue stock debt to YOU because it is cheaper than asking a bank.

Why is stock so “cheap”?  Well….because it is FREE.  Bank debt is harder to get out of.  If the company fails, the liquidated assets of the company will go first to the banks (before the stockholders).  Since debt is concentrated with the bank, they can ask the company to do things (stock ownership is dispersed, so stockholders (unless you’re a really large one) aren’t well organized and have no power).

Do you understand? Companies give you a piece of paper (you can call it stock or you can call it currency), that gives you no charge on the company (you can’t trade it in for any product), puts you last in line for liquidated assets if the company goes bankrupt, and is worth something only because other yahoos agree to pay you for it (but it has no utility).

Stock is simply currency that a company has issued (like the government issues US Dollars)……except you can’t buy anything with it.  You simply own it, like art or baseball cards, until someone else agrees to buy it from you.

The exception to this is companies that issue a dividend (you do actually get something in this case); however, the companies that don’t issue a dividend are still bought and sold very regularly (Microsoft didn’t for years and Google still doesn’t).

Stock price changes do not make (or lose) any money for the company:

Companies issue the public debt of stocks once, at the IPO (Initial Public Offering).  At the IPO they sell a bunch of shares to us and we give them money.  They then spend that money.  They gave us “shares” (which are worthless; they are not “sharing” anything)…..we gave them money.

The stock market is simply a second hand swap meet.

Stocks are to companies as used cars are to car makers……they make NO MONEY when their stock goes up (just like a sold used Toyota makes no money for Toyota).

People investing in stocks do not help business or the economy:

You’re not creating jobs (except in finance) or helping the company; stocks (at their best) are supposed to reflect the underlying health of a company; they do not CAUSE the underlying health of the company.

Here is a thought experiment:

If everyone bought the stock of a company, what would the outcome be?  Nothing except an inflated stock price.  No one really has anything.  Nothing has been produced (except fees for finance companies).

If everyone bought the PRODUCT of a company, what would the outcome be?  Well, they would have something (the product), and the company would get that money.  That is something you can work with.

Stock market prices do not predict anything:

Stocks may reflect some things, though what they reflect I’m not sure (human psychology about the markets themselves perhaps?).  The smartest PHDs in the world have thrown every algorithm in the world at stock data.  It is random from one day to the next.

The only proven way to predict the stock market is to have INSIDE INFORMATION.  The rest of us will never do better than the market in general except by luck.

The capital gains tax reduction on stock investments is simply a tax break for the rich:

The average person gets almost no income from stocks; functionally we don’t really care about the capital gains tax rate….because we don’t have any significant capital gains.

1 percent of all taxpayers collect over two-thirds of all capital gains; that top 1% gets a tax break on their income; we don’t.  We pay 33% or whatever, and they pay 15% on their capital gains.

It is said that a reduced capital gains tax encourages investment.  Perhaps (I won’t go into the economic arguments here)…however, in the labor vs. business struggle…..labor has really been losing out over the past twenty years.  Its hard to have sympathy for the capital gains crowd (since they just wrecked the world economy).

What is good for the stock market is not what is good for America:

Correlation is not causation.  It is true that if the underlying reality of the the economy is good then you’ll probably have a decent market return; however, you CANNOT WAG THE DOG in this case.  Propping up the stock market will not cause a fundamentally sound economy.  It will simply cause the stock holders to get rich…while the underlying fundamentals (labor, jobs, etc) continue to worsen.

Chew on that.

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