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Stocks represent ownership in a company. Apple has $200 billion in cash currently. Owning a share of Apple quite literally means that you own a share of that $2

Stocks represent ownership in a company. Apple has $200 billion in cash currently. Owning a share of Apple quite literally means that you own a share of that $200 billion. It's useful to think about this in terms of a company's tangible assets because it provides a lower bound on the price of a share (assuming the company has no debt). If the Apple share price ever dropped so low that the sum of all the shares was worth less than $200 billion, a savvy investor could just snap up all the shares and effectively purchase 200 billion dollars at a discount. Any premium on the price of a share beyond the company's assets comes from either the dividends that you expect to be paid out as a result of owning that stock, or from an expectation that the company's assets will grow in the future (so that share will entitle you to part ownership of $300 billion instead of $200 billion, for example).

setr 5y ago
The part I don't understand is how do I translate "ownership in apple" to USD. Obviously I can trade it to someone else, but that's just moving the problem -- eventually someone has to be in the position to actually extract real value out of the stock, in a fashion that correlates to company success. AFAIK dividends aren't an inherit property to a stock (it's a "class" of stock) so that's not fully satisfactory, and it's not guaranteed either (a board "chooses" to give out dividend, for reasons/amounts unclear to me). It's also very unclear how I would take my part ownership of $300B, and translate it to $20 in my pocket, except by passing the buck to some other investor. The only scenario I can think of is the risk of sufficient ownership to take over the company, at which point you could pay yourself wage or force buybacks, but then stocks are entirely worthless until someone holds less than 51% -- and even then, zuckerberg famously screws that equation too. So under this description, there's still no way to actually translate my FB stock into USD, without FB doing a buyback (which would be pointless, because there's no risk of control-loss anyways), until zuckerberg dies.
- chii 5y ago
  > eventually someone has to be in the position to actually extract real value out of the stock what is "real" value? If it's cash, then you can either sell the stock itself, to somebody else, which can repeat infinitely as long as the company is a going concern. There's no end - because there's no end to the profits of a company that continue to produce profits. Of course, it might end one day, but it would be the last bag holder who purchased a dying company (imagine if apple became what IBM is today). But that's got nothing to do with the structure and ownership of stocks, but that the company's performance declined.
  - setr 5y ago
    This skips the problem, again. You can trade a sheep as much as you want, between any numbers of investors. But there is some basic value to sheep, because eventually someone is able to convert the sheep into money, with effort time and process (butcher, shear, etc). Extracted Value dependent on market of derivative products, and efficiency of extraction. A sheep can be used to produce $20 USD, and traders who never see the sheep are simply trading on speculation (how much value the sheep can be extracted for today, how much it might be extracted for tomorrow, how badly will extractors want it, etc). The traders bounce the sheep around willy-nilly but eventually the sheep has a simple answer to “why does anyone value this object in the first place?” — because it can be used to extract more wealth than it costs. My poop can be speculatively traded infinitely as long it continues to exist. Anything can — it doesn’t matter the subject. But at some point, someone must actually want my poop for non-speculative trading it to have a value to speculate on. The question that keeps being bypassed is: who is actually in the position to do something productive with an FB stock? Note: I’m assuming that stocks don’t draw their value from the ether — no one wants stocks as art, at least no more than USD
    - chii 5y ago
      > do something productive with an FB stock? facebook itself is doing something productive (as measured by their profit). The stock of facebook is a pre-requisite for facebook to exist (in the productive form). The stock is not a commodity (like a sheep), which have intrinsic value. For facebook to produce value, they needed initial capital injection. This capital cannot exist if the stock, and the subsequent trading, doesn't exist.
      - setr 5y ago
        Facebook does something productive, but I don’t see how stocks map to that productivity. The only way I really see to take a stock and have it represent actual value, is to plug it into the stock market. But this is just trading between those trading on the potential value of the stock -- not on the value it gives to them (that is, they don't actually want the stock for any purpose but to move it -- they're middlemen). But if you imagined no stock market existed (you remove the middlemen), then is there any reason for anyone to want stock? That is, at the end of all this stock trading, who actually wants to have an FB stock? It doesn’t appear to me to be the public, or FB itself, or any particular investor. Everyone wants to hold stock, in order to get rid of it later (earning on the arbitrage) — but no one apparently wants it in the first place (it grants no power, potential earnings, and doesn’t really represent anything meaningful AFAICT); this is why the only thing to do with a crashed stock is to wipe your ass with it -- stocks are meaningless without their backing company -- but I'm currently not finding a way to claim that stocks are meaningful even when their company exists! Currency could be said to be in the same boat, but at least till the gold standard died, at the end of the day USD could be said to be minimally wanted by the Feds — mapping to gold — producing that base value you could further justify trading and speculating on. I suppose I don’t understand what justifies a base value for USD post-gold standard either (it was bootstrapped, and now is self sufficient? Or perhaps because we all assume the feds will always a assign value to it) Furthermore, because there’s no one who wants a stock in the end, there seems to be no reason for the value of a stock to rise/fall based on company successful — no more reason than my trash should. AFAICT, its just a happens-to-be — by the powers of god, luck and collective will, stocks have arbitrarily been selected to move with company performance, despite there being no real relationship between the two (the only people who want it more are people who intend to sell it to others who want it more — but you follow the chain through and you can’t find anyone who wants it for any other reason). And I really want to be convinced “a collective fiction” is not the answer (stocks exist because stocks hold value because stocks exist. Stock value tracks company success, because company success tracks stock value, because stock value tracks company success).

setr 5y ago

The part I don't understand is how do I translate "ownership in apple" to USD. Obviously I can trade it to someone else, but that's just moving the problem -- eventually someone has to be in the position to actually extract real value out of the stock, in a fashion that correlates to company success. AFAIK dividends aren't an inherit property to a stock (it's a "class" of stock) so that's not fully satisfactory, and it's not guaranteed either (a board "chooses" to give out dividend, for reasons/amounts unclear to me). It's also very unclear how I would take my part ownership of $300B, and translate it to $20 in my pocket, except by passing the buck to some other investor. The only scenario I can think of is the risk of sufficient ownership to take over the company, at which point you could pay yourself wage or force buybacks, but then stocks are entirely worthless until someone holds less than 51% -- and even then, zuckerberg famously screws that equation too. So under this description, there's still no way to actually translate my FB stock into USD, without FB doing a buyback (which would be pointless, because there's no risk of control-loss anyways), until zuckerberg dies.

chii 5y ago
> eventually someone has to be in the position to actually extract real value out of the stock what is "real" value? If it's cash, then you can either sell the stock itself, to somebody else, which can repeat infinitely as long as the company is a going concern. There's no end - because there's no end to the profits of a company that continue to produce profits. Of course, it might end one day, but it would be the last bag holder who purchased a dying company (imagine if apple became what IBM is today). But that's got nothing to do with the structure and ownership of stocks, but that the company's performance declined.
- setr 5y ago
  This skips the problem, again. You can trade a sheep as much as you want, between any numbers of investors. But there is some basic value to sheep, because eventually someone is able to convert the sheep into money, with effort time and process (butcher, shear, etc). Extracted Value dependent on market of derivative products, and efficiency of extraction. A sheep can be used to produce $20 USD, and traders who never see the sheep are simply trading on speculation (how much value the sheep can be extracted for today, how much it might be extracted for tomorrow, how badly will extractors want it, etc). The traders bounce the sheep around willy-nilly but eventually the sheep has a simple answer to “why does anyone value this object in the first place?” — because it can be used to extract more wealth than it costs. My poop can be speculatively traded infinitely as long it continues to exist. Anything can — it doesn’t matter the subject. But at some point, someone must actually want my poop for non-speculative trading it to have a value to speculate on. The question that keeps being bypassed is: who is actually in the position to do something productive with an FB stock? Note: I’m assuming that stocks don’t draw their value from the ether — no one wants stocks as art, at least no more than USD
  - chii 5y ago
    > do something productive with an FB stock? facebook itself is doing something productive (as measured by their profit). The stock of facebook is a pre-requisite for facebook to exist (in the productive form). The stock is not a commodity (like a sheep), which have intrinsic value. For facebook to produce value, they needed initial capital injection. This capital cannot exist if the stock, and the subsequent trading, doesn't exist.
    - setr 5y ago
      Facebook does something productive, but I don’t see how stocks map to that productivity. The only way I really see to take a stock and have it represent actual value, is to plug it into the stock market. But this is just trading between those trading on the potential value of the stock -- not on the value it gives to them (that is, they don't actually want the stock for any purpose but to move it -- they're middlemen). But if you imagined no stock market existed (you remove the middlemen), then is there any reason for anyone to want stock? That is, at the end of all this stock trading, who actually wants to have an FB stock? It doesn’t appear to me to be the public, or FB itself, or any particular investor. Everyone wants to hold stock, in order to get rid of it later (earning on the arbitrage) — but no one apparently wants it in the first place (it grants no power, potential earnings, and doesn’t really represent anything meaningful AFAICT); this is why the only thing to do with a crashed stock is to wipe your ass with it -- stocks are meaningless without their backing company -- but I'm currently not finding a way to claim that stocks are meaningful even when their company exists! Currency could be said to be in the same boat, but at least till the gold standard died, at the end of the day USD could be said to be minimally wanted by the Feds — mapping to gold — producing that base value you could further justify trading and speculating on. I suppose I don’t understand what justifies a base value for USD post-gold standard either (it was bootstrapped, and now is self sufficient? Or perhaps because we all assume the feds will always a assign value to it) Furthermore, because there’s no one who wants a stock in the end, there seems to be no reason for the value of a stock to rise/fall based on company successful — no more reason than my trash should. AFAICT, its just a happens-to-be — by the powers of god, luck and collective will, stocks have arbitrarily been selected to move with company performance, despite there being no real relationship between the two (the only people who want it more are people who intend to sell it to others who want it more — but you follow the chain through and you can’t find anyone who wants it for any other reason). And I really want to be convinced “a collective fiction” is not the answer (stocks exist because stocks hold value because stocks exist. Stock value tracks company success, because company success tracks stock value, because stock value tracks company success).