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> that over-promotes stocks as an investment vehicle. But what else is there? Holding cash is terrible because it even loses value and the real estate market f

> that over-promotes stocks as an investment vehicle. But what else is there? Holding cash is terrible because it even loses value and the real estate market feels grossly over-expensive. So if you earn more than you spend, where do you put your extra money? I don't think that bonds, p2p-lending or precious metals perform better in risk/reward.

lazulicurio 6y ago
> But what else is there? That's my point. Stocks outperforming cash, bonds, and precious metals isn't some universal truth. It's a product of Fed/USG policy (and other factors).
- naveen99 6y ago
  Stocks represent ownership of business producing goods and services and selling them for profit. Cash, bonds, and precious metals are just an accounting mechanism. The value is created by business. So it pretty much is universal truth.
  - lazulicurio 6y ago
    Bonds are not just an accounting mechanism; bonds are an alternative to stocks for investment. Even government bonds create value---if not funding something tangible (such as infrastructure), just the existence of a stable and functioning legal system is hugely valuable. Cash is more than an accounting system too, especially since the end of the gold standard. There isn't a fixed supply of dollars that businesses just move around. Also, with regards to both cash and precious metals: their value is as media for economic transactions; their value increases each time they change hands. Would you want to barter to buy shares of a company? Trade sheep to invest in Microsoft?
    - naveen99 6y ago
      I didn’t say bonds and cash can’t be investments, just that they don’t generate new goods and services. Cash and cash equivalents only generate value through passage of time. There isn’t any creativity involved. Creativity is long term more valuable than just the time value of money.
      - lazulicurio 6y ago
        That same reductionist argument can also be applied to stocks. Share ownership doesn't generate value in and of itself either. You're saying that businesses generate value. No disagreement from me there. But then you're saying that stocks are the only way to share the value that businesses create. That's where you lose me. Selling shares is not the only way for a company to raise funds to operate. Companies can also sell bonds or take out loans (i.e. cash). Your argument that stocks are inherently more valuable would only make sense if stocks were the only way to invest in a company.
        naveen99 6y ago
        Without share ownership, there is no business... you can have a business without loans. business generates value. Shares assign ownership. Loans just price risk of capital. Pricing the risk is also a business.
        lazulicurio 6y ago
        I think that you and I have fundamentally different views on what it means for a company to sell shares.
        naveen99 6y ago
        Sorry to beat a dead horse, but... Someone already owns a company before company sells (issues / dilutes) shares. That ownership is just shares. No shares need to ever be sold for them to exist. Founders create shares out of nothing when they create a business.
  - nrclark 6y ago
    If stock prices represent anything concrete, how is it that Snapchat's market cap is higher than Ford's? Do any of us actually believe that Snap's stock price is reflective of its value to society? Today, stock prices are all about perception and company image. Most shares are non-voting, and don't pay dividends. And you can't take your stock and march to a company headquarters to demand that they give you something of value in exchange. To an average small investor, shares in almost every company might as well be Magic cards. Their only value is to sell them later to a different collector.
    - naveen99 6y ago
      Stocks represent ownership and shareholder rights, which extend beyond voting rights. Equities are a piece of creative energy applied to capital. I am not saying you can’t lose money with wallstreetbets or that you can’t make a business of cash. But a creative business around money transmission and risk management is equities not cash itself.
    - leetcrew 6y ago
      > If stock prices represent anything concrete, how is it that Snapchat's market cap is higher than Ford's? > Do any of us actually believe that Snap's stock price is reflective of its value to society? of course not. the stock price doesn't represent the value to society; it represents the (perceived) value to investors, taking into account potential for growth. ford is an established, stable company, but it's hard to see any avenues for massive growth over the next decade. I don't personally believe snapchat will grow massively, but it's more likely than ford to do that or get purchased for a huge amount of money by a tech giant.
      - lazulicurio 6y ago
        If you re-read the last sentence of the GP's comment ("To an average small investor, shares in almost every company might as well be Magic cards. Their only value is to sell them later to a different collector"), I think that you're strengthening their position rather than disagreeing with them. In context, the GGP is positing that stocks should have a higher rate of return than other modes of investment because, to paraphrase, "companies create value". The point of the GP is that perceived value to investors drives the stock price more than value to society, thus countering the notion that stocks are inherently "better".
mcfly1985 6y ago
Bitcoin.
rsync 6y ago
"But what else is there? Holding cash is terrible ..." Holding cash might be terrible. Certainly the returns are and it makes sense that (the entire world) would be chasing higher yields elsewhere. However, if those assets take a 50% haircut at some point in the near future, holding cash will have looked like a fantastic idea. Given the current Schiller P/E of 26 (!) that was mentioned elsewhere in this discussion, a 50% haircut in US equities is not at all outlandish to consider.

lazulicurio 6y ago

> But what else is there? That's my point. Stocks outperforming cash, bonds, and precious metals isn't some universal truth. It's a product of Fed/USG policy (and other factors).

naveen99 6y ago
Stocks represent ownership of business producing goods and services and selling them for profit. Cash, bonds, and precious metals are just an accounting mechanism. The value is created by business. So it pretty much is universal truth.
- lazulicurio 6y ago
  Bonds are not just an accounting mechanism; bonds are an alternative to stocks for investment. Even government bonds create value---if not funding something tangible (such as infrastructure), just the existence of a stable and functioning legal system is hugely valuable. Cash is more than an accounting system too, especially since the end of the gold standard. There isn't a fixed supply of dollars that businesses just move around. Also, with regards to both cash and precious metals: their value is as media for economic transactions; their value increases each time they change hands. Would you want to barter to buy shares of a company? Trade sheep to invest in Microsoft?
  - naveen99 6y ago
    I didn’t say bonds and cash can’t be investments, just that they don’t generate new goods and services. Cash and cash equivalents only generate value through passage of time. There isn’t any creativity involved. Creativity is long term more valuable than just the time value of money.
    - lazulicurio 6y ago
      That same reductionist argument can also be applied to stocks. Share ownership doesn't generate value in and of itself either. You're saying that businesses generate value. No disagreement from me there. But then you're saying that stocks are the only way to share the value that businesses create. That's where you lose me. Selling shares is not the only way for a company to raise funds to operate. Companies can also sell bonds or take out loans (i.e. cash). Your argument that stocks are inherently more valuable would only make sense if stocks were the only way to invest in a company.
      - naveen99 6y ago
        Without share ownership, there is no business... you can have a business without loans. business generates value. Shares assign ownership. Loans just price risk of capital. Pricing the risk is also a business.
        lazulicurio 6y ago
        I think that you and I have fundamentally different views on what it means for a company to sell shares.
        naveen99 6y ago
        Sorry to beat a dead horse, but... Someone already owns a company before company sells (issues / dilutes) shares. That ownership is just shares. No shares need to ever be sold for them to exist. Founders create shares out of nothing when they create a business.
- nrclark 6y ago
  If stock prices represent anything concrete, how is it that Snapchat's market cap is higher than Ford's? Do any of us actually believe that Snap's stock price is reflective of its value to society? Today, stock prices are all about perception and company image. Most shares are non-voting, and don't pay dividends. And you can't take your stock and march to a company headquarters to demand that they give you something of value in exchange. To an average small investor, shares in almost every company might as well be Magic cards. Their only value is to sell them later to a different collector.
  - naveen99 6y ago
    Stocks represent ownership and shareholder rights, which extend beyond voting rights. Equities are a piece of creative energy applied to capital. I am not saying you can’t lose money with wallstreetbets or that you can’t make a business of cash. But a creative business around money transmission and risk management is equities not cash itself.
  - leetcrew 6y ago
    > If stock prices represent anything concrete, how is it that Snapchat's market cap is higher than Ford's? > Do any of us actually believe that Snap's stock price is reflective of its value to society? of course not. the stock price doesn't represent the value to society; it represents the (perceived) value to investors, taking into account potential for growth. ford is an established, stable company, but it's hard to see any avenues for massive growth over the next decade. I don't personally believe snapchat will grow massively, but it's more likely than ford to do that or get purchased for a huge amount of money by a tech giant.
    - lazulicurio 6y ago
      If you re-read the last sentence of the GP's comment ("To an average small investor, shares in almost every company might as well be Magic cards. Their only value is to sell them later to a different collector"), I think that you're strengthening their position rather than disagreeing with them. In context, the GGP is positing that stocks should have a higher rate of return than other modes of investment because, to paraphrase, "companies create value". The point of the GP is that perceived value to investors drives the stock price more than value to society, thus countering the notion that stocks are inherently "better".

mcfly1985 6y ago

Bitcoin.

rsync 6y ago

"But what else is there? Holding cash is terrible ..." Holding cash might be terrible. Certainly the returns are and it makes sense that (the entire world) would be chasing higher yields elsewhere. However, if those assets take a 50% haircut at some point in the near future, holding cash will have looked like a fantastic idea. Given the current Schiller P/E of 26 (!) that was mentioned elsewhere in this discussion, a 50% haircut in US equities is not at all outlandish to consider.