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> This I've never understood -- if a stock is detached from company earnings, then what drives the value of a stock, beyond the meaningless "someone else is wil

> This I've never understood -- if a stock is detached from company earnings, then what drives the value of a stock, beyond the meaningless "someone else is willing to pay for it" -- why are they willing? It's not at all clear to me why my apple stock should have greater value, if apple does better as a company (or is predicted to do better). It seems like it's a similar collective fiction to the one that gives money its value, but a fiction that provides far less social utility than money. Random thought: owning stocks gives you two things: voting rights and dividends. Take the dividends away, and you're left with voting rights. Those are typically pretty much worthless unless you own a billionaire's amount of shares (and sometimes not even then, if some other billionaire has super-voting shares). The collective fiction that small shareholdings have value without dividends mainly serves to create buy-in for a system that creates greater fools for those people.

wilkommen 5y ago
Yes you've nailed it! Said it even better than me. Stocks are a collective fiction just like money. Except stupider, and only beneficial to a relatively small number of people. And to your second point, it's true - even billionaires don't profit directly from owning stock in public companies. They profit from that stock by selling it to other billionaires or institutions. Billionaires make money from owning stocks in public companies in more or less the same way as retail traders. Billionaires who own private companies though, that's a whole other thing. If you own a private company in part or in whole, it is possible to just take the company's profits and pay them directly to yourself. But owning and selling stocks is so profitable that I think for the most part billionaires don't bother with private companies - that's why they always want companies they've invested in to IPO. That's when they cash out. Anyway thanks for posting!
mbg721 5y ago
Derivatives add another layer to the collective fiction. Even if they're useful for hedging, it still seems weird to me that you can use options to construct something mathematically equivalent to a share of stock without ever buying the actual stock.

wilkommen 5y ago

Yes you've nailed it! Said it even better than me. Stocks are a collective fiction just like money. Except stupider, and only beneficial to a relatively small number of people. And to your second point, it's true - even billionaires don't profit directly from owning stock in public companies. They profit from that stock by selling it to other billionaires or institutions. Billionaires make money from owning stocks in public companies in more or less the same way as retail traders. Billionaires who own private companies though, that's a whole other thing. If you own a private company in part or in whole, it is possible to just take the company's profits and pay them directly to yourself. But owning and selling stocks is so profitable that I think for the most part billionaires don't bother with private companies - that's why they always want companies they've invested in to IPO. That's when they cash out. Anyway thanks for posting!

mbg721 5y ago

Derivatives add another layer to the collective fiction. Even if they're useful for hedging, it still seems weird to me that you can use options to construct something mathematically equivalent to a share of stock without ever buying the actual stock.