Wrong, as always. If buying pushes the price up it increases the capital value of the stock the company still holds. If it goes high enough it makes equity cheaper than debt, and the company can swap a mandatory interest expense for a discretionary dividend. And lastly, investors are reluctant to invest in ANYTHING without liquidity*, which active trading provides. Without liquidity, capital raising through equity issues would not be possible at all.
* The exception to this appears to be property investors, who don't seem very bright anyway.
Since Herbie prompted as well! My take is this is a very long bow to draw..... You could make the same argument that house price rises are good because they give people the ability to borrow more money or use equity or have more confidence etc to consume money on other things and stimulate the economy.
So same same - at the end of the day, secondary market share *trading* - ie short term active trading, is a zero sum game. The activity may have some benefits around liquidity and price discovery as snowie argues, and having a secondary market in general is of course a "good thing" - for both shares and houses IMO, so I am not arguing that there is anything wrong here.
However to state that trading shares on the secondary market somehow DIRECTLY provides capital to business, is false. That was the point I was making. It still stands.
Since Herbie prompted as well! My take is this is a very long bow to draw..... You could make the same argument that house price rises are good because they give people the ability to borrow more money or use equity or have more confidence etc to consume money on other things and stimulate that economy.
So same same - at the end of the day, secondary market share *trading* - ie short term active trading, is a zero sum game. The activity may have some benefits around liquidity and price discovery as snowie argues, and having a secondary market in general is of course a "good thing" - for both shares and houses IMO, so I am not arguing that there is anything wrong here.
However to state that trading shares on the secondary market somehow DIRECTLY provides capital to business, is false. That was the point I was making. It still stands.
Thanks Sydneyite.
A Professional Demographer to an amateur demographer:"negative natural increase will never outweigh the positive net migration"
Since Herbie prompted as well! My take is this is a very long bow to draw..... You could make the same argument that house price rises are good because they give people the ability to borrow more money or use equity or have more confidence etc to consume money on other things and stimulate that economy.
So same same - at the end of the day, secondary market share *trading* - ie short term active trading, is a zero sum game. The activity may have some benefits around liquidity and price discovery as snowie argues, and having a secondary market in general is of course a "good thing" - for both shares and houses IMO, so I am not arguing that there is anything wrong here.
However to state that trading shares on the secondary market somehow DIRECTLY provides capital to business, is false. That was the point I was making. It still stands.
+1
Take risks - if you win you will become wealthy, if you lose you will become wise
You could make the same argument that house price rises are good because they give people the ability to borrow more money or use equity or have more confidence etc to consume money on other things and stimulate the economy.
I disagree, but if you are interested in discourse, I will give you my reasons. Houses, unlike financial instruments, are the built environment. A listed company has means to create more shares, almost out of thin air, but building houses takes real resources. If the corporation fails to make good use of the capital, investors withdraw capital from the corporation, and sometimes the corporation disappears and resources and capital are re-allocated to other corporations. This is healthy and leads to robust market economies. Bailing out large corporations is unhealthy and rewards incompetence, but it is nearly always done for political reasons (i.e. votes in democracies and compliance in Communist dictatorships).
If capital is misallocated to houses, the houses are still there, still contribute to the supply of housing, and modern housing markets very, very rarely have any diversification. i.e. in the modern economy, housing markets tend to bubble and pop all at once, which is unhealthy and causes severe economic disruption and pain to large numbers of people. People who vote. And with their vote comes a demand of the government to "do something" to protect their investment, their savings, their retirement, which any government that wants to get elected happily obliges with, causing even MORE capital to be misallocated to another bubble, making the market even more fragile, leading to a viscous circle of ever larger asset bubbles and transfer of wealth to those who understand the failings of socialism and the mechanisms of markets.
Quote:
So same same - at the end of the day, secondary market share *trading* - ie short term active trading, is a zero sum game. The activity may have some benefits around liquidity and price discovery as snowie argues, and having a secondary market in general is of course a "good thing" - for both shares and houses IMO, so I am not arguing that there is anything wrong here.
However to state that trading shares on the secondary market somehow DIRECTLY provides capital to business, is false. That was the point I was making. It still stands.
So having functioning capital markets gives businesses access to capital, but doesn't provide capital to businesses? I guess if you _have_ to be right, you always are.
Speak when you are angry and you will make the best speech you will ever regret. Ambrose Bierce
I disagree, but if you are interested in discourse, I will give you my reasons. Houses, unlike financial instruments, are the built environment. A listed company has means to create more shares, almost out of thin air, but building houses takes real resources. If the corporation fails to make good use of the capital, investors withdraw capital from the corporation, and sometimes the corporation disappears and resources and capital are re-allocated to other corporations. This is healthy and leads to robust market economies. Bailing out large corporations is unhealthy and rewards incompetence, but it is nearly always done for political reasons (i.e. votes in democracies and compliance in Communist dictatorships).
If capital is misallocated to houses, the houses are still there, still contribute to the supply of housing, and modern housing markets very, very rarely have any diversification. i.e. in the modern economy, housing markets tend to bubble and pop all at once, which is unhealthy and causes severe economic disruption and pain to large numbers of people. People who vote. And with their vote comes a demand of the government to "do something" to protect their investment, their savings, their retirement, which any government that wants to get elected happily obliges with, causing even MORE capital to be misallocated to another bubble, making the market even more fragile, leading to a viscous circle of ever larger asset bubbles and transfer of wealth to those who understand the failings of socialism and the mechanisms of markets.
So having functioning capital markets gives businesses access to capital, but doesn't provide capital to businesses? I guess if you _have_ to be right, you always are.
You can say the same for house prices. If second hand house prices go up (like second hand shares) developers step in a build more houses, land is cleared, gentrification etc which employs people and drives a lot of economic activity.
Share market trading is no better than second hand house trading.
" stock market speculator... - ..I've still got to admit to having a quiet(?) and somewhat deep seated loathing for the latter.."
Stock investors provide much needed capital for companies to develop sites and hire people for projects that earn foreign income via gold, cobalt, lithium etc. These people go on to buy land and houses. What do you recommend? That everyone buys a concrete slab and prays for the best? This is foolishness.
Its always worth remembering that, even in low growth economies, purchase of the property in which one lives is considered a long term hedge against inflation.
Even if some rental returns can be crappy people have been buying out of ignorance or the means to seek cash flow or safe-haven.
Jon Snow
3 Sep 2017, 10:42 PM
I disagree, but if you are interested in discourse, I will give you my reasons. Houses, unlike financial instruments, are the built environment. A listed company has means to create more shares, almost out of thin air, but building houses takes real resources. If the corporation fails to make good use of the capital, investors withdraw capital from the corporation, and sometimes the corporation disappears and resources and capital are re-allocated to other corporations. This is healthy and leads to robust market economies. Bailing out large corporations is unhealthy and rewards incompetence, but it is nearly always done for political reasons (i.e. votes in democracies and compliance in Communist dictatorships).
If capital is misallocated to houses, the houses are still there, still contribute to the supply of housing, and modern housing markets very, very rarely have any diversification. i.e. in the modern economy, housing markets tend to bubble and pop all at once, which is unhealthy and causes severe economic disruption and pain to large numbers of people. People who vote. And with their vote comes a demand of the government to "do something" to protect their investment, their savings, their retirement, which any government that wants to get elected happily obliges with, causing even MORE capital to be misallocated to another bubble, making the market even more fragile, leading to a viscous circle of ever larger asset bubbles and transfer of wealth to those who understand the failings of socialism and the mechanisms of markets.
So having functioning capital markets gives businesses access to capital, but doesn't provide capital to businesses? I guess if you _have_ to be right, you always are.
In all, people earn $ and acquire assets to provide for their future consumption. Since housing can be consumed, one can buy the asset directly or buy other assests that will eithergrow or allow to buy housing, or generate sufficient revenue stream to pay for the housing.
Housing is simply one of the few needs one can easily hedge.
Newjerk? can you try harder than dig up another person's blog. My first promo was with Billabong and my name in English is modified with a T, am Perth born but also lived in Sydney to make my $$ It's Absolutely Fabulous if it includes brilliant locations, & high calibre tenants..what more does one want? Understand the power of the two "P"" or be financially challenged Even better when there is family who are property mad and one is born in some entitlements.....Understand that beautiful women are the exhibitionists we crave attention, whilst hot blooded men are the voyeurs ... A stunning woman can command and takes pleasure in being noticed. Seems not too many understand what it means to hold and own props and get threatened by those who do. Banks are considered to be law abiding and & rather boring places yeah not true . A bank balance sheet will show capital is dwarfed by their liabilities this means when a portions of loans is falling its problems for the bank.
You can say the same for house prices. If second hand house prices go up (like second hand shares) developers step in a build more houses, land is cleared, gentrification etc which employs people
Not really. Unlike equity in corporations, everyone needs somewhere to live. Housing is an essential good, the demand is always 100%.
There is no reason to allocate speculative capital to housing, because the buy side always will. And with the cost and time taken of actually building a house plummeting by 50-75% in the last 30 years, the supply side should really be oversupplying the market.
Why isn't it? Because unlike capital markets, the supply side is restricted by governments through zoning and land sales and corrupt labour laws. It is a completely inefficient market, for reasons of policy and corruption.
Quote:
and drives a lot of economic activity.
If you want economic activity, break windows. If you want prosperity, create value, or improve productivity. Building more houses adds capital stock, but immigration adds to the denominator, so on balance, it adds no value to the economy. Improving the speed or lowering the cost of building new houses would add value, but that value-adding is done outside of Australia, so our economy does not accrue the benefit.
Speak when you are angry and you will make the best speech you will ever regret. Ambrose Bierce
So having functioning capital markets gives businesses access to capital, but doesn't provide capital to businesses? I guess if you _have_ to be right, you always are.
Just on this point - as I have previously stated, new capital is only provided to businesses via the "capital markets" during an IPO or a capital raising event. The vast majority of turnover on the market is due to neither (< ~$75B give or take new capital raised per year - based on latest figures, vs $1T+ annual trading turnover).
To illustrate my point, answer a simple question: Say yesterday morning I bought 500 BHP shares off Simon for $27 each, and then later in the day I sold them to you for $28 each. How much capital will BHP (the actual company) have gained (or lost) due to those transactions?
Jon Snow
3 Sep 2017, 10:42 PM
I disagree, but if you are interested in discourse, I will give you my reasons. Houses, unlike financial instruments, are the built environment. A listed company has means to create more shares, almost out of thin air, but building houses takes real resources. If the corporation fails to make good use of the capital, investors withdraw capital from the corporation, and sometimes the corporation disappears and resources and capital are re-allocated to other corporations. This is healthy and leads to robust market economies. Bailing out large corporations is unhealthy and rewards incompetence, but it is nearly always done for political reasons (i.e. votes in democracies and compliance in Communist dictatorships).
If capital is misallocated to houses, the houses are still there, still contribute to the supply of housing, and modern housing markets very, very rarely have any diversification. i.e. in the modern economy, housing markets tend to bubble and pop all at once, which is unhealthy and causes severe economic disruption and pain to large numbers of people. People who vote. And with their vote comes a demand of the government to "do something" to protect their investment, their savings, their retirement, which any government that wants to get elected happily obliges with, causing even MORE capital to be misallocated to another bubble, making the market even more fragile, leading to a viscous circle of ever larger asset bubbles and transfer of wealth to those who understand the failings of socialism and the mechanisms of markets.
I have no fundamental disagreement with most of the points you make here. I said there were similarities between the markets - not that they are exactly the same. Certainly investment in productive business is important, essential, and "good" for the functioning of the economy. So is investment in housing - but yes the outcomes are not *exactly* the same, and there are differences in the mechanics and actor behaviour, impacts of capital allocation etc etc that highlight differences.
The bottom line though remains that people who think that because they speculatively trade shares they are somehow adding more value to the economy than say a housing investor, are wrong. They are playing a zero sum game, and are not directly supplying any new capital to businesses through their speculative trading activity (unless participating in IPOs or new capital raising).
The bottom line though remains that people who think that because they speculatively trade shares they are somehow adding more value to the economy than say a housing investor, are wrong. They are playing a zero sum game, and are not directly supplying any new capital businesses through there speculative trading activity (unless participating in IPOs or new capital raising).
Exactly, they both add nothing to the economy, a zero sum game as you put it. This is why negative gearing should be abolished on all forms of investment.
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