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> so they're already contributing an order of magnitude or more than I am My friend's gma passed away, giving him $500k inheritance. He invested that money at
by itake 6y ago
> so they're already contributing an order of magnitude or more than I am
My friend's gma passed away, giving him $500k inheritance. He invested that money at the bottom of the crash last year and increased it to $1.2m.
In this situation, how did he contribute $700k of value?
- peeters 6y agoWell not to put a dollar value on the contribution but he gave companies $500k in accessible capital which they used to grow or recover.
- fock 6y agoyou know how the stock market works?
- itake 6y agoCan you explain it? My understanding is they bought the stock from another investor, held on to it, and then sold it. I'm not sure where the value was created. Maybe if the company was creating more shares and the investor bought them directly from the company, then the company use the new funding to create value, but I'm not sure that is what actually happened.
- Slippery_John 6y agoIt's not that simple. Buying $500k of stocks does not mean you gave $500k to a company to use unless the stocks were bought directly from them. More likely it was bought from another investor with cold feet, and at best the company benefited from the increased stock price generated by the demand.
- bluecalm 6y agoYeah but the reason companies are able to raise as much money with stock issuance is the promise of liquidity thus providing liquidity is valuable. This example isn't a problem either. Someone made 700k at the cost of someone else, likely an over-leveraged players who were forced to liquidate because of the threat of the pandemic. The market is far from efficient and the swings in prices are unavoidable. Normal long term investors didn't lose much if anything during this crash. The government got a cut because of money changing hands. If anything one could ask why is the government getting anything if no value was created.
- itake 6y agoThe problems people have with the rich are that there are 2 ways you can make money: A/ sell time B/ buy/sell assets One of these is heavily taxed, the other is not. One of these produces value to society and the other does not. I acknowledge that some "time sellers" don't produce value, but _on average_ most time sellers are producing something positive.
- codehalo 6y agoYou can ask the same question of someone who invested $5 and got $12.
- pitaj 6y agoNominally, by providing capital to companies innovating in the market, allowing them to improve their business and provide more value to their customers.
- ceejayoz 6y ago> by providing capital to companies innovating in the market Only if he's buying an IPO or angel investing or whatnot. If I buy an Apple share right now, Apple's not getting that money.
- pitaj 6y agoPutting more money into the stock market raises the prices of stocks, allowing companies to raise more capital.
- itake 6y agoOne person is putting money into the market at the same rate someone is taking money out. Buy and selling doesn't inherently raise the price of a stock.
- thrill 6y agoApply already got "that" money. Future value works both ways.
- andrepd 6y agoClassic example of justifying a thing with the thing itself. The reason companies need the wealthy to innovate and invest is precisely because capital and credit is privatised. So in effect you're saying people deserve a reward for private capital because capital is private. x) Regardless of your feelings about this, the argument is unsound.