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evilweasel posted:people don't really get why stocks are categorically different than Digital Beanie Babies. I'd actually like a little more info on this, as a non-finance guy. If a company is unlikely to ever issue dividends and the stocks in question are non-voting shares, how are those stocks different than Digital Beanie Babies?
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Mar 5, 2023 21:22
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VikingofRock posted:I'd actually like a little more info on this, as a non-finance guy. If a company is unlikely to ever issue dividends and the stocks in question are non-voting shares, how are those stocks different than Digital Beanie Babies? Because it's partial ownership of the company. Surely you see the difference between that and ownership of an unregulated token that has no intrinsic value or even wide adoption/acceptance.
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Mar 5, 2023 21:36
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I think it's fair to say that certain kinds of stocks are digital tulip bulbs but not all kinds
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Mar 5, 2023 21:47
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Motronic posted:Because it's partial ownership of the company. Surely you see the difference between that and ownership of an unregulated token that has no intrinsic value or even wide adoption/acceptance. If it's a non-voting share, how is it meaningfully partial ownership of the company? This is an honest question, I'm not trying to be obtuse.
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Mar 5, 2023 21:49
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eXXon posted:- The GFC was caused largely by subprime lending No it was caused by securitization of debt. The market ran out of debt to securitize so it started doing largescale subprime lending to fill the securities it was basing off of them. Which they lied about the contents of. The huge rise in subprime lending was a result of the banks engaging in risky behavior. Blaming it on subprime loans was a narrative the banks spread to blame retail when the collapse was simply them gambling the entire world economy on defrauding each other.
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Mar 5, 2023 21:51
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VikingofRock posted:If it's a non-voting share, how is it meaningfully partial ownership of the company? This is an honest question, I'm not trying to be obtuse. Because it's an ownership share of both current and future assets and profits. Why do you feel that voting rights are what makes this meaningful? Voting rights for a regular retail shareholder are 100% inconsequential.
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Mar 5, 2023 21:56
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Motronic posted:Because it's partial ownership of the company. Surely you see the difference between that and ownership of an unregulated token that has no intrinsic value or even wide adoption/acceptance.
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Mar 5, 2023 22:00
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Motronic posted:Because it's an ownership share of both current and future assets and profits. Why do you feel that voting rights are what makes this meaningful? Voting rights for a regular retail shareholder are 100% inconsequential. Because I figured voting was how you exercise that ownership. What the value in owning a part of those assets and profits, if you can't directly partake in the profits (via dividends) or exercise control of them (via voting)? Put another way, what does that ownership even mean?
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Mar 5, 2023 22:07
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Inferior Third Season posted:"Owning" a hundred millionth of a company has literally no intrinsic value. The only actual value it has it what you can sell it for, and the price is determined by a market that has proven itself repeatedly to be completely irrational and prices things based on hopes and fears and unicorn farts. The price of a stock can soar for no particular reason and later drop to zero. It is exactly the same as beanie babies. There is no arguing with a "position" like this, so best of luck in your future endeavors. Which I assume is digging a bunker or something. VikingofRock posted:Because I figured voting was how you exercise that ownership. What the value in owning a part of those assets and profits, if you can't directly partake in the profits (via dividends) or exercise control of them (via voting)? Put another way, what does that ownership even mean? It means you can sell it to someone else who wishes to own it when you decide that you no longer do. And hopefully the company has made profits, grown, reinvested, etc between when you bought it and when you want to sell it so the people interested in purchasing your ownership are willing to pay more for it than you did when you bought it. Motronic fucked around with this message at 22:10 on Mar 5, 2023 |
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Mar 5, 2023 22:07
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VikingofRock posted:I'd actually like a little more info on this, as a non-finance guy. If a company is unlikely to ever issue dividends and the stocks in question are non-voting shares, how are those stocks different than Digital Beanie Babies? I'll type up an answer back at a computer but is there a specific stock you are thinking of? I can use it as an example if so.
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Mar 5, 2023 22:08
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Motronic posted:There is no arguing with a "position" like this, so best of luck in your future endeavors. Which I assume is digging a bunker or something.
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Mar 5, 2023 22:11
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Inferior Third Season posted:"Owning" a hundred millionth of a company has literally no intrinsic value. The only actual value it has it what you can sell it for, and the price is determined by a market that has proven itself repeatedly to be completely irrational and prices things based on hopes and fears and unicorn farts. The price of a stock can soar for no particular reason and later drop to zero. It is exactly the same as beanie babies. Stocks represent a legal claim on the assets and earnings of the company. If the company were to be sold or liquidated, the shareholders would still be entitled to a share of the proceeds based on their ownership stake in the company.
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Mar 5, 2023 22:12
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Inferior Third Season posted:I own plenty of stocks and index funds. I play the game, because there is no alternative. I am just aware that it is all built on bullshit, and there are no adults in charge. Very well, you've made your point known to the thread.
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Mar 5, 2023 22:26
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evilweasel posted:I'll type up an answer back at a computer but is there a specific stock you are thinking of? I can use it as an example if so. Sure, how about GOOG (to bring this back to somewhat relevance to this thread). Motronic posted:It means you can sell it to someone else who wishes to own it when you decide that you no longer do. And hopefully the company has made profits, grown, reinvested, etc between when you bought it and when you want to sell it so the people interested in purchasing your ownership are willing to pay more for it than you did when you bought it. This feels identical to a Beanie Baby, if there is nothing beyond "other people will pay for it" to give it value. And actually, a Beanie Baby has a secondary use as a toy. That said, I think SaTaMaS answered my question below. SaTaMaS posted:Stocks represent a legal claim on the assets and earnings of the company. If the company were to be sold or liquidated, the shareholders would still be entitled to a share of the proceeds based on their ownership stake in the company. This actually makes sense. For example, the possibility of a twitter stock owner getting $54.20 per share last year when Musk bought it made Twitter stock valuable. I hadn't really thought about that aspect, thanks.
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Mar 5, 2023 22:28
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You also have a claim on profits. Stocks pay out dividends and split into more shares.
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Mar 5, 2023 22:40
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Stocks definitely have value if they will, in the future, pay dividends or if someone (eg Musk) is going to buy control of the company. Shareholders can also put pressure on companies (via board seats, I guess?) to start issuing dividends, and even though your (1e-9)% of the company doesn't mean anything, its use still gives it a value. Also the company itself uses that stock for borrowing, which it probably does even if it has cash on hand, because that's capitalism, so the company is encouraged to prop up their stock value, even without KPIs and other bullshit. It's also weird because if a company had a pile of cash did their stock started dropping suddenly, their first strategy should be to announce dividends. Or a buyback which is arguably the same thing. I think I'm in the minority, but I'd argue a company that will never be bought and never intends to give out dividends (Facebook, Google) does not really have value, but Apple did start giving out dividends a while ago so that shows you can't tell what the future will bring.
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Mar 5, 2023 22:46
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VikingofRock posted:I'd actually like a little more info on this, as a non-finance guy. If a company is unlikely to ever issue dividends and the stocks in question are non-voting shares, how are those stocks different than Digital Beanie Babies? So I am going to dramatically oversimplify in certain respects. The "intrinsic value" of a stock is, basically, the future income you can expect from the stock, discounted to the present day (a dollar today is worth more than a dollar a year from now), and risk-adjusted (the more certain it is you will get the dollar a year from now, the more it is worth). This is different from the "market value" (what someone will pay you for the stock today, or charge you to buy it). However, what differentiates a stock from a Digital Beanie Baby is that a stock has intrinsic value - that it can generate cash in the future even if nobody will give you money for it today. Ultimately, the market value is supposed to match the intrinsic value, but there are a lot of reasons it might not. Stock trading, fundamentally, is buying stocks where the intrinsic value is above the market value, and selling stocks where the market value is above the intrinsic value. This requires being more skilled than the market is at judging the inherent value of stocks. It is a long-standing debate over if the stock market is "efficient" enough that such people exist. Investing, on the other hand, is simply collecting that future income, as well as the "risk premium" - you get paid more because the investment is riskier. When you absolutely need to make sure the investment doesn't go down ever, it pays less. If you can afford to have it go down sometimes, it pays more. Trading Digital Beanie Babies is trading on the "greater fool" hypothesis: the intrinsic value is zero but you're betting someone will pay you more than you paid anyway. Ultimately a stock's value can't really go to zero without the underlying business collapsing. Even when a business is insolvent, the stock has "option value" - the value of the stock reflects the chance the company recovers before it declares bankruptcy and wipes out your stock. There are a lot of companies where the main expected way to make money was "get bought by google" and they would get valued basically by the expected price you'd sell the company to google for, when it might happen, and the risk the company would collapse before that. There are also a lot of ways you can slice equity ownership. The simple way to think of a company is the equity is all in one undifferentiated class, below the debt. The equity is worth whatever the business is worth, minus the debt on the business. But within that equity slice, you might be able to slice up that value in very complex ways that quickly require a (specialized) lawyer to understand. VikingofRock posted:Sure, how about GOOG (to bring this back to somewhat relevance to this thread). So the other thing to keep in mind is: economically there is no distinction between a dividend and a stock buyback. Both are ways of distributing the profits of the business to the shareholders. If you buy back half the stock for $50 each, an individual who owns two shares of stock will then own one share afterwards, and $50. They will own the same amount of the company they did before. This is economically equivalent to a dividend of $25 per share (where people who wanted to exit entirely then sold their share, and people who wanted to reinvest in the company used the dividend to buy from the previous people). There is a tax difference though: dividends are taxed at a higher rate ("ordinary income" vs "long term capital gains"). As a result, while Google has never declared a dividend, it has done massive stock buybacks: https://www.cnbc.com/2022/04/26/alphabet-announces-70-billion-buyback.html. $145 billion in the past three years - that is a lot of money. That's where the value of Google stock comes from: the expected future income from stock buybacks. That $145 billion almost certainly hugely more than was ever invested into Google when it raised money. Ultimately voting rights are nearly irrelevant. They basically represent a final check on the ability of a company to toss out underperforming management, but you as an ordinary stockholder have absolutely zero input into the company's direction regardless of if you vote your shares. Your shares having the ability to vote mostly adds a tiny amount of value in that you could sell the shares to an investor looking to seize control of the company and profit by tossing out lovely management. Many tech companies create tiered voting so the founders retain control. That probably reduces the value of the stock, though there are some people who think it enhances it because they take a longer-term view. evilweasel fucked around with this message at 23:38 on Mar 5, 2023 |
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Mar 5, 2023 22:48
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Ultimately the money you get from investing in stocks or bonds comes from value generated by useful economic activity. As a result it has a positive expected return. Investing in something like futures or options is just gambling: every dollar someone makes comes from someone else's loss. So you generally shouldn't invest in those unless you have risk you need to hedge - it has a 0% expected rate of return (before the house takes its cut). Investing in something that is worthless except for the chance someone else will buy it from you has a negative expected rate of return because it's going to zero eventually and you shelled out more than zero for it.
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Mar 5, 2023 22:54
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Thank you, this helps clear things up a lot. This sort of effort post is a lot of work, and I really appreciate it.
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Mar 5, 2023 23:48
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evilweasel posted:So the other thing to keep in mind is: economically there is no distinction between a dividend and a stock buyback. Both are ways of distributing the profits of the business to the shareholders. If you buy back half the stock for $50 each, an individual who owns two shares of stock will then own one share afterwards, and $50. They will own the same amount of the company they did before. This is economically equivalent to a dividend of $25 per share (where people who wanted to exit entirely then sold their share, and people who wanted to reinvest in the company used the dividend to buy from the previous people). I've always disliked buybacks over dividends because I've thought that they don't mean anything unless you sell and take profits right away? If a stock misses a quarterly target, the stock price is gonna take a big hit regardless of how many buybacks they did in the past, and if the performance doesn't improve then all of those buybacks will be worthless to you. At least with dividends it's cash in your hand now instead of hoping that the business improves FOREVER and maybe you'll get a payday when you retire? Am I missing something? I guess potential tax differences but again you'd better hope that stock never falls because then you won't have to worry about paying taxes on profits to begin with. Original_Z fucked around with this message at 12:36 on Mar 6, 2023 |
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Mar 6, 2023 12:34
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It's kinda funny how bad people often are at explaining stocks even though they're honestly pretty simple as a base concept. It's what you can do with them that gets complicated. They are, of course, ultimately societal constructs that only 'really' exist on paper and as ones and zeroes on computers, but so are a lot of things, like these very forums.
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Mar 6, 2023 14:33
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Ghost Leviathan posted:It's kinda funny how bad people often are at explaining stocks even though they're honestly pretty simple as a base concept. It's what you can do with them that gets complicated. And money
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Mar 6, 2023 14:50
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Stocks are nfts
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Mar 6, 2023 15:27
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Watermelon Daiquiri posted:Stocks are nfts What do you think the f in nft means?
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Mar 6, 2023 15:27
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Original_Z posted:I've always disliked buybacks over dividends because I've thought that they don't mean anything unless you sell and take profits right away? If a stock misses a quarterly target, the stock price is gonna take a big hit regardless of how many buybacks they did in the past, and if the performance doesn't improve then all of those buybacks will be worthless to you. At least with dividends it's cash in your hand now instead of hoping that the business improves FOREVER and maybe you'll get a payday when you retire? Am I missing something? I guess potential tax differences but again you'd better hope that stock never falls because then you won't have to worry about paying taxes on profits to begin with. What you are missing is that if you don't participate in the stock buyback, you own more of the company. The issue here is the annoying reality that "a share" of a company gives you virtually no information: a share of Company X is a different percentage of its equity than a share of Company Y. Also, a share of Company X on one date is often a different percentage of its equity than a share of Company X on a different date. If performance doesn't improve - but doesn't decline - you are entitled to a larger share of that continuing profit stream. If profits improve, you are also entitled to a larger share of those improved profits. If profits decline, yeah, you wish you sold instead of held. But you'd wish that either way. If a stock you own conducts a buyback and you would prefer it be a dividend, you just sell some of the stock. Same as if a stock you own conducts a dividend and you would prefer it be a buyback (you don't participate in) - you use the dividend to buy more shares of the stock. If you own an index fund, you almost certainly automatically do the latter: you get dividends on the stocks in the index, which are then converted into more shares in the index. I think why buybacks get so much dislike compared to dividends is just that it is not intuitive that it is returning profits to shareholders. It seems like money that is just wasted entirely, while people understand the point of dividends. There is, of course, a serious discussion of how much of a company's profits should flow to the workers vs. the equity holders - but the distinction between stock buybacks and dividends is politically salient to that discussion but not actually meaningfully different in reality. Of course, it is also reasonable to be upset at stock buybacks as a way for the wealthy to avoid paying their fair share of taxes due to the difference in tax treatment, but I have basically never seen that argument made because it requires so much explaining to get to that point that people (very reasonably) generally get bored and wander off before getting to the conclusion.
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Mar 6, 2023 15:33
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I think it's also that companies sometimes do buybacks shortly before running into financial problems, rather than keep a reserve.
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Mar 6, 2023 15:45
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cinci zoo sniper posted:What do you think the f in nft means? Reminder that niftys have proven to be quite fungible last year, as the creators have caved to pressure and hard forked or blacklisted images after high profile thefts
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Mar 6, 2023 16:13
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I think there's also an oversized focus on companies/stocks that are significant outliers, or make the news a whole bunch. Tesla or Google or Apple or whatever the gently caress happened with GameStop -- these things really feed into the perception that stocks are just a made-up concept, because, yeah, in those cases the stocks don't appear to function with much or any connection to the underlying performance of the companies in question. That is not true of most stocks, or the stock market at large.
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Mar 6, 2023 16:15
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cinci zoo sniper posted:What do you think the f in nft means? Fugazi, obviously. New Fugazi Tokens, right?
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Mar 6, 2023 16:17
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Mister Facetious posted:Reminder that niftys have proven to be quite fungible last year, as the creators have caved to pressure and hard forked or blacklisted images after high profile thefts lmao On a completely random crypto tangent, I'll use this opportunity to plug one of my all-time favourite articles about crypto (it's a bit long). https://www.bloomberg.com/features/2022-the-crypto-story/
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Mar 6, 2023 16:21
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https://web3isgoinggreat.comquote:February 24, 2023 Mister Facetious fucked around with this message at 16:28 on Mar 6, 2023 |
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Mar 6, 2023 16:24
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Molly is absolutely fantastic too, yeah.
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Mar 6, 2023 16:26
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PT6A posted:I think there's also an oversized focus on companies/stocks that are significant outliers, or make the news a whole bunch. Tesla or Google or Apple or whatever the gently caress happened with GameStop -- these things really feed into the perception that stocks are just a made-up concept, because, yeah, in those cases the stocks don't appear to function with much or any connection to the underlying performance of the companies in question. And it should explain a lot that crypto enthusiasts are probably almost entirely contained within the group of people most misguidedly enthusiastic over those.
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Mar 6, 2023 16:41
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OddObserver posted:I think it's also that companies sometimes do buybacks shortly before running into financial problems, rather than keep a reserve. I have seen the argument that stock buybacks are actually preferable to dividends for that issue. Basically, nobody really expects regular stock buybacks. You do it when you have a pile of cash, and you don't do it when you don't.* On the other hand, with dividends there's an expectation of regularity: you pay the dividend on a constant basis, and cutting the dividend is seen as a Really Bad Sign. That can pose problems like, for example, when Intel just recently made some massively stupid wage cuts that will wreck its business rather than cut their usual dividend. Either way, companies can be dumb, but the expectation that dividends are regular might create more pressure to make a payment the company can't actually afford than buybacks do. * unless, of course, you have executives with options/other comp that really, really cares about the price on a specific day and they'd rather get paid than do what's in the long-term health of the company. but these execs can goose the price by declaring a dividend as well at the right time.
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Mar 6, 2023 16:53
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All external links on Twitter are currently broken. https://twitter.com/pbump/status/1632785781533339648 EDIT: Looks like it's fixed for now, but both all external links and images in tweets were broken for at least half an hour. Doggles fucked around with this message at 18:47 on Mar 6, 2023 |
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Mar 6, 2023 18:38
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Doggles posted:All external links on Twitter are currently broken. At a press conference later this evening: We'd like to announce a revolutionary new feature that will blow away all other social media platforms. Are you tired of seeing a website you'd like to go to and having to manually type that site's address into your browser? Well going forward Twitter Blue subscribers will be able to click on that text to "link" you from Twitter to a different site!
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Mar 6, 2023 18:47
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evilweasel posted:I think we mostly agree except on a few points: One important part that connects to the present is the amount of trust that investors put in a new mathematical model, the Gaussian copula model. This allowed banks to create mortgage-backed securities and collateralized debt obligations that were rated AAA by credit rating agencies, even though many of the underlying mortgages were subprime and therefore carried a high risk of default. At the moment banks are putting more and more trust in deep learning despite it still being a black box mathematically speaking. It's very possible that once again unexpected events or changes in market conditions will create scenarios that the models weren't trained on and create uncertain results.
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Mar 6, 2023 19:04
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https://twitter.com/Enichan/status/1383215194885611520 Evergreen post
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Mar 6, 2023 19:20
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evilweasel posted:stuff about stocks It should also be pointed out that stocks value the company (somewhat) based on what it is. Revenues, profits, holdings, ect. So there is a tangible THING connected the company which is not to say it can't be overvalued (see Tesla being the most valuable car company making the least amount of cars) but there are revenues, material, buildings, ect that Tesla has. A beanie baby cloth and beads that were overbought because of people's stupidity about collecting things and why certain collectibles are valuable.
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Mar 6, 2023 19:39
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Mooseontheloose posted:It should also be pointed out that stocks value the company (somewhat) based on what it is. Revenues, profits, holdings, ect. So there is a tangible THING connected the company which is not to say it can't be overvalued (see Tesla being the most valuable car company making the least amount of cars) but there are revenues, material, buildings, ect that Tesla has. yeah, as an individual stockholder you have basically no right to those corporate assets. if the company liquidates it is almost certainly because you're hosed. but you can assemble all of the shares and presto the assets are yours, which also gives them inherent value based on the present value of the assets today, minus the debt.
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