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Termyn8or -> RE: Imagine there's no stock market... (6/9/2010 8:39:08 AM)
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"People don't really understand how good we have it here, problems and all"
True, but it is going to become apparent that we have been living on borrowed time. We have almost always had a negative trade balance for quite a few decades now. How long could anyone spend more than they make ?
And in essence, when a company goes public, that means they want to expand or something, but don't have enough of a slush fund to do it. They might be able to borrow it, but selling stock allows them to set the effective interest rate by adjusting the dividends paid. All this is weighed because an negative change will affect the value of the stock somewhat. If too many people sell, it really gets bad. And if the dividends are there, at least there is some value. It allows alot more flexiblity, but in essence is the same thing - borrowing money.
In the purest form, like true communism, it would be a great thing. But with abuses it is a nightmare. And it takes money to abuse such things. And those with enough money to tilt the odds in their favor did not pick it off a tree. New money learns how to make it or keep it, old money learns this alot earlier in life. Big money can't directly affect the dividends, just the value of the stock. But in the end, via manipulation they've made money which must mean someone lost money. The end result is the stock will sell and the value will come up because if the dividend amount remains constant it will have an even more favorable P/E ratio. So the rest of us get ours in the form of payments, like an annuity, but they've taken their money and run.
The system is alot more complex than that of course, but I choose not to play. I also don't play acey duecey. At a card game a guy is trying to get me to play it and says "You can make alot of money" to which I replied "No, you mean YOU can make alot of money".
Not to mention that those dividends are nothing more or less than debt service. Now without that capital for expansion, say you can't produce enough cars to meet demand. This will allow true market forces to raise the value of each car, and the price can then be raised to some extent. So the expansion will come, just a bit later. But the result is no debt service. That means a better bottom line which in turn, means higher profits.
The problem is the same - "I want it now". I admit that I don't know the subject all that well, but since I never intend to play the stock market I don't need to know. I know enough to stay out of it. If people are doing well at it, great. But those who do well at it, well that money comes from somewhere. And those who make it are not picking up a wrench and working on an assembly line.
And answerability to the shareholders can have a deleterious effect on the economy as a whole. Things like this impel banks to use bailout money to buy competitors, and manufacturers to move offshore which compounds the problem of regulations in the US. This further cripples our economy.
In short people thought they could have everything, so in the end will wind up with nothing. It is not just because of the NYSE crapshoot, but it helped. Another nail in the coffin.
T
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