4 ms·

"The stock market has no real world utility. It's a tool for gambling, speculative investment, and pump-and-dump schemes. There, I said it."

by cwkoss 5y ago

rawtxapp 5y ago
Especially when you consider that a large percentage of stocks don't pay dividends, so you're only holding it because you think the company will do better which may or may not translate into increased share value.
- hanniabu 5y ago
  Plus the term ponzi is rooted in traditional markets
- fossuser 5y ago
  This does give me pause and is pretty weird when you think about it. The 'old way' makes a nice kind of sense. Company goes to the public to raise money to build a factory or something. In exchange the public gets a share of the company. The company builds the factory and is able to grow as a result, the public ownership of the stock rewards owners with some small cut of the profits. Today almost none of that is true. There's enough private money that there's no financial need to go to public markets a lot of the time. Going public is mostly done for recruiting and giving employees that helped build the company liquidity. Public share holders no longer even have impactful voting rights a lot of the time (something I'm fine with, but still is relevant in comparing the value). The public invests because of the stock being tied to growth without dividends (and large passive index funds investments in retirement funds). Why does stock value track company value when there's no actual value coming from it? Am I missing something obvious? The above is the best case too - the bad case is best described by Matt Levine [0]. In some ways crypto assets are easier to understand - they're often tied to supporting the network infrastructure itself, or in the case of tokens whatever the protocol is doing. It aligns incentives around adoption of a decentralized protocol. The same is sort of true for share holders, but not really to the same extent and not as direct. [0]: >"There are other business models. For instance you could make a product that people kind of want, or that they would want if it were affordable. Then you convince people to buy it by selling it for much less than it costs you to make it, or by paying them to buy it. If you do this well, you will have high revenue and rapid revenue growth, because lots of people are buying your product. You will not, however, get rich, because you’ll be spending more money making the product than you get from your customers. Your revenue will be high but your net income will be negative; it will cost you money to run this business. > But then you will go to investors, and you will say “look, I have a company with rapidly growing revenue, that’s worth something, you should pay me for a share of my company.” And they will agree—“we love rapid revenue growth,” they will say—and you will sell stock in the company for hundreds of millions of dollars. And then it will cost them money to run the business, and you will be rich. There are various possible endgames; in some of them you go to prison but in quite a lot of them you just stay rich and become an elder statesman admired for your business acumen."
- NationalPark 5y ago
  Companies have assets and cashflows which could be given to shareholders in a liquidation. What you're describing is more like what's called a "binary option" which is actually quite similar to a lot of crypto projects.
  - rawtxapp 5y ago
    > in a liquidation That would be like a worst case scenario though, right? Which would in turn make those shares worth a lot less to begin with.
  - Animats 5y ago
    ... "binary option" which is actually quite similar to a lot of crypto projects. Yes. Some of the same scammers are behind both.[1] [1] https://www.timesofisrael.com/german-police-raid-call-centers-allegedly-running-israel-linked-investment-scams/ https://www.timesofisrael.com/german-police-raid-call-center...
c7DJTLrn 5y ago
I don't even know where to begin with this one. Ever heard of IPOs? That seems like a pretty useful utility of the stock market. Why even compare a "currency" to the stock market? They are two different things.
- cwkoss 5y ago
  Lots of crypto companies have successfully raised money with ICOs. Seems pretty similar in this respect...
  - NationalPark 5y ago
    What are some of the businesses that raised money with ICOs and became successful? Are there any that aren't themselves cypto-financial-services products?
    - cwkoss 5y ago
      I'd say the majority of new coins/tokens are launched with something like an ICO over the past 5 years. Most/all of them are crypto-financial. I generally think non-crypto businesses using ICOs are extra scammy, because redemption of services is usually a squishy meatspace process - fungibility is rare. I am not a fan of 'blockchain' companies that fundraise with ICOs for IRL redemption of products or services - really gambling on the integrity of company leadership to not alter the terms before redemption. (Personally I think 'access rights' is the only subset that is feasible for crypto<>IRL commerce - digital content DRM, event tickets, stuff like that) Which ones are successful is certainly the subject of debate (I'd probably say "we don't know yet"), but I think over half of the top 40 coins on https://coinmarketcap.com/ https://coinmarketcap.com/ were created via ICO.

"The stock market has no real world utility. It's a tool for gambling, speculative investment, and pump-and-dump schemes. There, I said it."

by cwkoss 5y ago

"The stock market has no real world utility. It's a tool for gambling, speculative investment, and pump-and-dump schemes. There, I said it."

rawtxapp 5y ago

Especially when you consider that a large percentage of stocks don't pay dividends, so you're only holding it because you think the company will do better which may or may not translate into increased share value.

hanniabu 5y ago
Plus the term ponzi is rooted in traditional markets
fossuser 5y ago
This does give me pause and is pretty weird when you think about it. The 'old way' makes a nice kind of sense. Company goes to the public to raise money to build a factory or something. In exchange the public gets a share of the company. The company builds the factory and is able to grow as a result, the public ownership of the stock rewards owners with some small cut of the profits. Today almost none of that is true. There's enough private money that there's no financial need to go to public markets a lot of the time. Going public is mostly done for recruiting and giving employees that helped build the company liquidity. Public share holders no longer even have impactful voting rights a lot of the time (something I'm fine with, but still is relevant in comparing the value). The public invests because of the stock being tied to growth without dividends (and large passive index funds investments in retirement funds). Why does stock value track company value when there's no actual value coming from it? Am I missing something obvious? The above is the best case too - the bad case is best described by Matt Levine [0]. In some ways crypto assets are easier to understand - they're often tied to supporting the network infrastructure itself, or in the case of tokens whatever the protocol is doing. It aligns incentives around adoption of a decentralized protocol. The same is sort of true for share holders, but not really to the same extent and not as direct. [0]: >"There are other business models. For instance you could make a product that people kind of want, or that they would want if it were affordable. Then you convince people to buy it by selling it for much less than it costs you to make it, or by paying them to buy it. If you do this well, you will have high revenue and rapid revenue growth, because lots of people are buying your product. You will not, however, get rich, because you’ll be spending more money making the product than you get from your customers. Your revenue will be high but your net income will be negative; it will cost you money to run this business. > But then you will go to investors, and you will say “look, I have a company with rapidly growing revenue, that’s worth something, you should pay me for a share of my company.” And they will agree—“we love rapid revenue growth,” they will say—and you will sell stock in the company for hundreds of millions of dollars. And then it will cost them money to run the business, and you will be rich. There are various possible endgames; in some of them you go to prison but in quite a lot of them you just stay rich and become an elder statesman admired for your business acumen."
NationalPark 5y ago
Companies have assets and cashflows which could be given to shareholders in a liquidation. What you're describing is more like what's called a "binary option" which is actually quite similar to a lot of crypto projects.
- rawtxapp 5y ago
  > in a liquidation That would be like a worst case scenario though, right? Which would in turn make those shares worth a lot less to begin with.
- Animats 5y ago
  ... "binary option" which is actually quite similar to a lot of crypto projects. Yes. Some of the same scammers are behind both.[1] [1] https://www.timesofisrael.com/german-police-raid-call-centers-allegedly-running-israel-linked-investment-scams/ https://www.timesofisrael.com/german-police-raid-call-center...

c7DJTLrn 5y ago

I don't even know where to begin with this one. Ever heard of IPOs? That seems like a pretty useful utility of the stock market. Why even compare a "currency" to the stock market? They are two different things.

cwkoss 5y ago
Lots of crypto companies have successfully raised money with ICOs. Seems pretty similar in this respect...
- NationalPark 5y ago
  What are some of the businesses that raised money with ICOs and became successful? Are there any that aren't themselves cypto-financial-services products?
  - cwkoss 5y ago
    I'd say the majority of new coins/tokens are launched with something like an ICO over the past 5 years. Most/all of them are crypto-financial. I generally think non-crypto businesses using ICOs are extra scammy, because redemption of services is usually a squishy meatspace process - fungibility is rare. I am not a fan of 'blockchain' companies that fundraise with ICOs for IRL redemption of products or services - really gambling on the integrity of company leadership to not alter the terms before redemption. (Personally I think 'access rights' is the only subset that is feasible for crypto<>IRL commerce - digital content DRM, event tickets, stuff like that) Which ones are successful is certainly the subject of debate (I'd probably say "we don't know yet"), but I think over half of the top 40 coins on https://coinmarketcap.com/ https://coinmarketcap.com/ were created via ICO.