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Don’t talk about the market on HN. Every time I bring it up there’s a dozen people who insist that the stock market is a scam and no one should consider an appr

by tempsy 7y ago

Don’t talk about the market on HN. Every time I bring it up there’s a dozen people who insist that the stock market is a scam and no one should consider an appreciating asset as a contributor to their net worth.

wayoutthere 7y ago
It's not only not a scam, it's the only reliable way to generate wealth.
- tempsy 7y ago
  Not the only reliable way but it’s reliable. Real estate is more so in the right markets. But yes see my other comments for examples of what I mean.
  - wayoutthere 7y ago
    In my experience, it's difficult to amass the amount of wealth required to invest in real estate without the stock market.
    - tempsy 7y ago
      It’s more work but I mean buying a rental in a market that is up and coming and renting it out. Most people can learn how to do it.
- neffy 7y ago
  The stock market doesn´t generate wealth, it prices second hand (for the most part) company ownership coupons. Inventing new technologies creates wealth. Building, constructing actual objects such as cars, clothes, computers, medicines creates wealth. Growing food creates wealth. The stock market is a way of moving ownership around to a limited extent, but mostly it is a medieval way of sharing risk among the ownership class that has been extended way beyond its original purpose and designs. The entire stock market could be wiped out tomorrow, and there would still be an economy of factories, farms etc. The reverse is not the case.
  - tempsy 7y ago
    so you don’t participate in the market because...semantics? no one suggested a stock is like a fixed income asset that is “income generating”
falcolas 7y ago
The thing about stocks is, to me, that their value is completely divorced from anything other than “what someone may pay for it”. Company posts losses, stock can go up. Company posts profits above projections, the stock can go down. It’s solely based on human behavior, which is completely opaque and illogical to me. EDIT: Disagree if you want, but it's quite demonstrably true. The stock market keep going up only because we humans have put in protections to ensure that it can't crash. We will literally stop trading entirely to ensure that the overall trend is upwards. However, this is unsustainable; permanent growth (that outpaces inflation) is impossible. Yet we keep (to me illogically) thinking that it will continue this way forever - to quote a sibling thread here "it's the only reliable way to generate wealth," as if it is permanently incapable of also generating poverty.
- deanmoriarty 7y ago
  What would be an investment vehicle with expected returns above inflation whose value is not dependent on “what someone may pay for it“? These companies are making profits and by buying stocks you are entitled in their present and future stream of dividends. It’s not different than investing in your friend’s business restaurant.
  - falcolas 7y ago
    > by buying stocks you are entitled in their present and future stream of dividends If the value of stock was driven by the potential dividends, I would agree. But the actual dividend payouts are meaningless in the transaction; it's only worth what the next owner of that piece of stock will buy it for. For example, stock in a business that has no revenue (or doesn't pay dividends) and that provides non controlling votes, should be worthless. But it's not. Instead, you have prices per share set so high that even if the company was wildly profitable and paid out dividends it would take decades or centuries to make that money back.
    - deanmoriarty 7y ago
      it should most definitely not be worthless. A company not paying dividends is akin to you investing in your friend’s restaurant, and have your friend tell you that by investing you are entitled to a piece of the pie, but the business plan he has in mind is to invest all the profits (if any) for the next 10 years to grow the business and expand to new locations, and just after 10 years start sharing profits or selling it to someone else. In such scenario, is that piece of the pie worthless? I say most definitely not, because, net of risk, the expectation is that your “slice” will end up being more valuable than what you invested in. I ask my question again: what is another investment that doesn’t operate by this basic logic? What is a business where its value is purely and solely based on a hardcoded multiple of current profits, and such multiple cannot go up and down based on how the buyers feel the future growth trajectory will be for such business?
icedchai 7y ago
I don't think that's true, given the large component of FAANG compensation coming from the stock market.
- tempsy 7y ago
  Skim this thread and tell me it’s not true
  - icedchai 7y ago
    Fair enough. But you can find other threads where people talk about making 500K+ a year, and 50%+ of that is coming from stock. Without the stock market, that sort of compensation would be unheard of.
    - tempsy 7y ago
      Well exactly, but the HN audience is not majority FAANG.

by tempsy 7y ago

wayoutthere 7y ago

It's not only not a scam, it's the only reliable way to generate wealth.

tempsy 7y ago
Not the only reliable way but it’s reliable. Real estate is more so in the right markets. But yes see my other comments for examples of what I mean.
- wayoutthere 7y ago
  In my experience, it's difficult to amass the amount of wealth required to invest in real estate without the stock market.
  - tempsy 7y ago
    It’s more work but I mean buying a rental in a market that is up and coming and renting it out. Most people can learn how to do it.
neffy 7y ago
The stock market doesn´t generate wealth, it prices second hand (for the most part) company ownership coupons. Inventing new technologies creates wealth. Building, constructing actual objects such as cars, clothes, computers, medicines creates wealth. Growing food creates wealth. The stock market is a way of moving ownership around to a limited extent, but mostly it is a medieval way of sharing risk among the ownership class that has been extended way beyond its original purpose and designs. The entire stock market could be wiped out tomorrow, and there would still be an economy of factories, farms etc. The reverse is not the case.
- tempsy 7y ago
  so you don’t participate in the market because...semantics? no one suggested a stock is like a fixed income asset that is “income generating”

falcolas 7y ago

The thing about stocks is, to me, that their value is completely divorced from anything other than “what someone may pay for it”. Company posts losses, stock can go up. Company posts profits above projections, the stock can go down. It’s solely based on human behavior, which is completely opaque and illogical to me. EDIT: Disagree if you want, but it's quite demonstrably true. The stock market keep going up only because we humans have put in protections to ensure that it can't crash. We will literally stop trading entirely to ensure that the overall trend is upwards. However, this is unsustainable; permanent growth (that outpaces inflation) is impossible. Yet we keep (to me illogically) thinking that it will continue this way forever - to quote a sibling thread here "it's the only reliable way to generate wealth," as if it is permanently incapable of also generating poverty.

deanmoriarty 7y ago
What would be an investment vehicle with expected returns above inflation whose value is not dependent on “what someone may pay for it“? These companies are making profits and by buying stocks you are entitled in their present and future stream of dividends. It’s not different than investing in your friend’s business restaurant.
- falcolas 7y ago
  > by buying stocks you are entitled in their present and future stream of dividends If the value of stock was driven by the potential dividends, I would agree. But the actual dividend payouts are meaningless in the transaction; it's only worth what the next owner of that piece of stock will buy it for. For example, stock in a business that has no revenue (or doesn't pay dividends) and that provides non controlling votes, should be worthless. But it's not. Instead, you have prices per share set so high that even if the company was wildly profitable and paid out dividends it would take decades or centuries to make that money back.
  - deanmoriarty 7y ago
    it should most definitely not be worthless. A company not paying dividends is akin to you investing in your friend’s restaurant, and have your friend tell you that by investing you are entitled to a piece of the pie, but the business plan he has in mind is to invest all the profits (if any) for the next 10 years to grow the business and expand to new locations, and just after 10 years start sharing profits or selling it to someone else. In such scenario, is that piece of the pie worthless? I say most definitely not, because, net of risk, the expectation is that your “slice” will end up being more valuable than what you invested in. I ask my question again: what is another investment that doesn’t operate by this basic logic? What is a business where its value is purely and solely based on a hardcoded multiple of current profits, and such multiple cannot go up and down based on how the buyers feel the future growth trajectory will be for such business?

icedchai 7y ago

I don't think that's true, given the large component of FAANG compensation coming from the stock market.

tempsy 7y ago
Skim this thread and tell me it’s not true
- icedchai 7y ago
  Fair enough. But you can find other threads where people talk about making 500K+ a year, and 50%+ of that is coming from stock. Without the stock market, that sort of compensation would be unheard of.
  - tempsy 7y ago
    Well exactly, but the HN audience is not majority FAANG.