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"Most stock owners hope this very thing, t" Stocks imply ownership of assets. Sure, in terms of 'hoping that someone willy buy' is similar to BTC, but the val

by jariel 5y ago

"Most stock owners hope this very thing, t" Stocks imply ownership of assets. Sure, in terms of 'hoping that someone willy buy' is similar to BTC, but the valuation is completely different. A stock is valued based on the performance of it's actual profit generation. BTC is just a made up number. It's what people think the crowd will buy it for. Granted, this mechanism itself can be useful in some scenarios, but BTC itself isn't useful, at least not right now.

_huayra_ 5y ago
I think people with BTC FOMO forget that it was always some sort of "hype Ponzi scheme". Back in 2011, I worked in an office that had one guy who was really into BTC. Looking back now, everyone thinks "wow he was such a genius to get in so early", but back then it was not profitable to mine, even if the difficulty was far lower. We'd constantly roast this coworker over his seemingly loony efforts to put solar on his house to cover the cost of mining neglecting to consider the solar panels would (in our opinions back then) put him in the red for a long time. (good on him for at least going green with it). I must admit I'm quite jealous of his insistence despite us roasting him (he's probably a multimillionaire now on BTC), but anyone who says "Oh yeah I could totally tell that BTC would take off in 2011" is being disingenuous at best. Unlike stocks which imply ownership of assets of a company, BTC is a pure hype machine, with the most hype given out by people who are already bought in. If any product or service has ONLY people who use it hyping it up (e.g. BTC, and especially NFTs!) or only people who are NOT using it hyping it up (e.g. the myriad get-rich-quick schemes about some drop-shipping Amazon thing, real estate, or "hOw To BE aN eNTrePreNeUR" in a vague sense of the term (whatever the Gary V & friends stuff is); all those guys make money not by doing what they're telling you to do but by telling you what to do...), it's usually a bad sign.
saalweachter 5y ago
I also like to point out in these contexts that a trillion dollars a year flow back from the profits of the companies of the S&P to the investors in the S&P 500, in the form of dividends and stock buybacks. It's not just a zero-sum game, making money off fellow investors who bet the stock will go one way when it goes the other.
ccortes 5y ago
> A stock is valued based on the performance of it's actual profit generation. I'm not sure that's the case any more. I mean we've seen billion dollar companies that just can't reach profitability.
- jariel 5y ago
  The stock is valued of the basis the net present value of future earnings. The obvious difficulty there is determining the future earnings (and discount rate). But that doesn't mean they don't exist - it's a rational premise of valuation. Amazon is worth a lot because it's a giant machine with $350B in revenues - so investors can quibble over their earnings and 'how much that is worth' in future earnings - but it's based on those numbers. BTC valuation is just whatever the crowd wants to pay. A BTC is a magic number, and that's it.
  - ccortes 5y ago
    > But that doesn't mean they don't exist - it's a rational premise of valuation. Some times they do and some times they don't. That means it's not a fundamental property for stock valuation. What was the rational premise of valuation behind Gamestop? There was one, but it had little or nothing to do with Gamestop's future earinings.
    - jariel 5y ago
      "That means it's not a fundamental property for stock valuation." Sorry this is not true let me illustrate: If there is a 9/10 chance that the profits will be $1, and a 1/10 chance that it will be $0, then we can value those profits in present terms at $0.9 (Edit: assuming no issues with cost of capital, time value of money etc. i.e. constant real dollars) If we can reasonably calculate the profits and risk, then we can make a valuation. GameStop was not a valuation, it was a stampede. Also note that everything is subject to whims of speculation, fads etc. etc..
      - ccortes 5y ago
        > If there is a 9/10 chance that the profits will be $1, and a 1/10 chance that it will be $0, then we can value those profits in present terms at $0.9 (Edit: assuming no issues with cost of capital, time value of money etc. i.e. constant real dollars) Yes, you can do that. You can argue that that's the smart way of doing it. But you don't have to and that's the point. Elon musk tweets can manipulate the stock market almost at will. There is no profit analysis there, just the mob following Musk. So again, future profits have nothing to do with a stock valuation. So times it does, but sometimes it doesn't. And if some times it doesn't, then it's not a fundamental property of it.

by jariel 5y ago

_huayra_ 5y ago

I think people with BTC FOMO forget that it was always some sort of "hype Ponzi scheme". Back in 2011, I worked in an office that had one guy who was really into BTC. Looking back now, everyone thinks "wow he was such a genius to get in so early", but back then it was not profitable to mine, even if the difficulty was far lower. We'd constantly roast this coworker over his seemingly loony efforts to put solar on his house to cover the cost of mining neglecting to consider the solar panels would (in our opinions back then) put him in the red for a long time. (good on him for at least going green with it). I must admit I'm quite jealous of his insistence despite us roasting him (he's probably a multimillionaire now on BTC), but anyone who says "Oh yeah I could totally tell that BTC would take off in 2011" is being disingenuous at best. Unlike stocks which imply ownership of assets of a company, BTC is a pure hype machine, with the most hype given out by people who are already bought in. If any product or service has ONLY people who use it hyping it up (e.g. BTC, and especially NFTs!) or only people who are NOT using it hyping it up (e.g. the myriad get-rich-quick schemes about some drop-shipping Amazon thing, real estate, or "hOw To BE aN eNTrePreNeUR" in a vague sense of the term (whatever the Gary V & friends stuff is); all those guys make money not by doing what they're telling you to do but by telling you what to do...), it's usually a bad sign.

saalweachter 5y ago

I also like to point out in these contexts that a trillion dollars a year flow back from the profits of the companies of the S&P to the investors in the S&P 500, in the form of dividends and stock buybacks. It's not just a zero-sum game, making money off fellow investors who bet the stock will go one way when it goes the other.

ccortes 5y ago

> A stock is valued based on the performance of it's actual profit generation. I'm not sure that's the case any more. I mean we've seen billion dollar companies that just can't reach profitability.

jariel 5y ago
The stock is valued of the basis the net present value of future earnings. The obvious difficulty there is determining the future earnings (and discount rate). But that doesn't mean they don't exist - it's a rational premise of valuation. Amazon is worth a lot because it's a giant machine with $350B in revenues - so investors can quibble over their earnings and 'how much that is worth' in future earnings - but it's based on those numbers. BTC valuation is just whatever the crowd wants to pay. A BTC is a magic number, and that's it.
- ccortes 5y ago
  > But that doesn't mean they don't exist - it's a rational premise of valuation. Some times they do and some times they don't. That means it's not a fundamental property for stock valuation. What was the rational premise of valuation behind Gamestop? There was one, but it had little or nothing to do with Gamestop's future earinings.
  - jariel 5y ago
    "That means it's not a fundamental property for stock valuation." Sorry this is not true let me illustrate: If there is a 9/10 chance that the profits will be $1, and a 1/10 chance that it will be $0, then we can value those profits in present terms at $0.9 (Edit: assuming no issues with cost of capital, time value of money etc. i.e. constant real dollars) If we can reasonably calculate the profits and risk, then we can make a valuation. GameStop was not a valuation, it was a stampede. Also note that everything is subject to whims of speculation, fads etc. etc..
    - ccortes 5y ago
      > If there is a 9/10 chance that the profits will be $1, and a 1/10 chance that it will be $0, then we can value those profits in present terms at $0.9 (Edit: assuming no issues with cost of capital, time value of money etc. i.e. constant real dollars) Yes, you can do that. You can argue that that's the smart way of doing it. But you don't have to and that's the point. Elon musk tweets can manipulate the stock market almost at will. There is no profit analysis there, just the mob following Musk. So again, future profits have nothing to do with a stock valuation. So times it does, but sometimes it doesn't. And if some times it doesn't, then it's not a fundamental property of it.