4 ms·

I think one of the big problems is that most people's retirement money gets pumped into the stock market to purchase shares on the SECONDARY market. When people

I think one of the big problems is that most people's retirement money gets pumped into the stock market to purchase shares on the SECONDARY market. When people buy shares on the secondary market, companies never see any of that money. But when companies sell shares directly to the public through the primary capital markets, that money can be invested to produce NEW goods and services which create economic GROWTH. The whole point of a stock market is for companies to raise money from the public to produce new goods and services and generate economic growth, but in reality companies are doing very little of this. In fact, they often do the OPPOSITE! Instead of raising capital by issuing new shares, companies burn their earnings buying back existing shares from the public. It's insane! Economists in the future will look back in amazement and wonder how we could have possibly been so stupid.

curun1r 9y ago
> Instead of raising capital by issuing new shares, companies burn their earnings buying back existing shares from the public. It's insane! You're ignoring all the ways that companies use their stock as a currency. From employee compensation to non-cash acquisitions, companies absolutely benefit from the secondary market. Especially in an era of low interest rates, it makes more sense for companies to borrow capital when they need it rather than raising money by issuing new equity, especially when other ways of issuing equity come with tax advantages.
lmm 9y ago
Having too much money in the company is just as bad as having too little. Companies that have something worth spending money on raise money (whether as rights issues, debt or something else) and spend it. Companies that have nothing profitable to do with their money give it to their shareholders (the fact that they tend to do buybacks rather than dividends is mainly an artefact of the tax system rather than a real difference). That's as it should be.

curun1r 9y ago

> Instead of raising capital by issuing new shares, companies burn their earnings buying back existing shares from the public. It's insane! You're ignoring all the ways that companies use their stock as a currency. From employee compensation to non-cash acquisitions, companies absolutely benefit from the secondary market. Especially in an era of low interest rates, it makes more sense for companies to borrow capital when they need it rather than raising money by issuing new equity, especially when other ways of issuing equity come with tax advantages.

lmm 9y ago

Having too much money in the company is just as bad as having too little. Companies that have something worth spending money on raise money (whether as rights issues, debt or something else) and spend it. Companies that have nothing profitable to do with their money give it to their shareholders (the fact that they tend to do buybacks rather than dividends is mainly an artefact of the tax system rather than a real difference). That's as it should be.