3 ms·
In your theory, there is no cost to servicing loans (on both sides), foreclosing on an asset or long term lockup of capital in not perfectly liquid markets. Or
by HWR_14 3y ago
In your theory, there is no cost to servicing loans (on both sides), foreclosing on an asset or long term lockup of capital in not perfectly liquid markets. Or other uses for shares (eg exerting corporate control) absent receiving dividend streams.
- anonymouskimmer 3y agoWith the exception of corporate control, this is covered in my final sentence.
- HWR_14 3y agoNone of my costs had to do with middlemen.
- anonymouskimmer 3y agoLoan servicing costs only exist because of middlemen. If two people directly interface for a loan there is no additional cost (other than the cost of transportation, which only exists because a middleman is charging for gas and car maintenance). Foreclosing on an asset doesn't happen in my example, but regardless is not a cost, but a risk, which the interest rate should be accounting for. Longterm lockup of capital is not a problem, as either party in my example are financially gaining regardless. And I granted you the other uses for shares, which technically can be done without buying the share, but at a middleman cost (renting the share). I really don't care to continue this. Mine was just a hypothetical in favor of the idea that there's always a "loser" (when compared to all possible financial alternatives) in stock trades, even if everyone ends up happy with the trade. Sure, there are holes in the hypothetical, which is why I said I agreed with the comment I was replying to.