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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 val

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".

leetcrew 6y ago
I'm not sure I fully agree with either position. first of all, whether or not a company "creates value for society" is a red herring. it doesn't matter to an individual looking for an investment vehicle. > 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 this is true to the extent that thinking of stocks this way probably wouldn't hurt you as a small investor, but it obscures the reason why stocks have value and are different from bonds. when you buy a stock, you are locking in a fraction of future real productivity, whether or not you can derive cashflow from it directly. with a bond, you are locking in a nominal return, which could result in a real loss over time. although stocks have significantly outperformed bonds historically, I would hesitate to say that one is inherently better than the other; they just carry different risks. as an aside, I'm really not sure why non-voting shares that don't pay dividends are valuable, but AFAIK, these are not as common as nrclark suggests.
- lazulicurio 6y ago
  Treating stocks as fractions of future real productivity ignores why companies sell shares in the first place. If the value of a company was wholly in its future real productivity, then companies would never part with ownership. However, companies do sell shares because they need liquidity now, whereas the future value of the company is purely speculative. Shares are but one of many alternatives for companies to raise liquidity. These alternatives provide opportunities to investors with different risk/reward profiles. As you say, there's nothing special about stocks that makes them inherently superior to other forms of investment.

leetcrew 6y ago

I'm not sure I fully agree with either position. first of all, whether or not a company "creates value for society" is a red herring. it doesn't matter to an individual looking for an investment vehicle. > 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 this is true to the extent that thinking of stocks this way probably wouldn't hurt you as a small investor, but it obscures the reason why stocks have value and are different from bonds. when you buy a stock, you are locking in a fraction of future real productivity, whether or not you can derive cashflow from it directly. with a bond, you are locking in a nominal return, which could result in a real loss over time. although stocks have significantly outperformed bonds historically, I would hesitate to say that one is inherently better than the other; they just carry different risks. as an aside, I'm really not sure why non-voting shares that don't pay dividends are valuable, but AFAIK, these are not as common as nrclark suggests.

lazulicurio 6y ago
Treating stocks as fractions of future real productivity ignores why companies sell shares in the first place. If the value of a company was wholly in its future real productivity, then companies would never part with ownership. However, companies do sell shares because they need liquidity now, whereas the future value of the company is purely speculative. Shares are but one of many alternatives for companies to raise liquidity. These alternatives provide opportunities to investors with different risk/reward profiles. As you say, there's nothing special about stocks that makes them inherently superior to other forms of investment.