3 ms·

Sure, I know what the accounting says. I just don't know what it means. If I own stock in Microsoft, it means I own a percentage of all its assets (real estate

Sure, I know what the accounting says. I just don't know what it means. If I own stock in Microsoft, it means I own a percentage of all its assets (real estate, intangibles, etc), along with a right to a percentage of its revenue streams. Plus I run the risk of my asset being worthless if Microsoft fails. So I know what that means. Similarly, if I own Microsoft bonds, it means I have a right to a fixed revenue stream from it, and further, can claim a proportion of its assets if it stops paying me. So I can be said to 'own' a proportion of its assets, insofar as I have certain rights over them. And again, I run the (smaller) risk of my asset being worthless if Microsoft fails. If I have lent Bob money on a non-recourse basis to buy a house, it's a similar story: I have the right to a fixed revenue stream from Bob, and can claim his asset if he stops paying me. So again, I can be said to own a proportion of the house, less whatever I'd pay him if I seized it. And again, I run the risk of the house burning down, etc etc. In all three of these examples, my balance sheet asset refers to something real. But if I've lent Bob money on a full-recourse basis, what is the asset? Not the house -- we've established that. Not the cash -- the cash is gone. So what is the debt instrument in my balance sheet based on?

PaulDavisThe1st 3y ago
https://www.investopedia.com/ask/answers/08/nonrecourse-loan-vs-recourse-loan.asp https://www.investopedia.com/ask/answers/08/nonrecourse-loan... The full-recourse loan instrument gives you access to any other assets Bob may have (including future assets such as wages).
- geye1234 3y ago
  But these 'assets' are entirely notional. They may not really exist. They may start existing at some point in the future, or they may not. How can I claim ownership over something notional?
  - PaulDavisThe1st 3y ago
    How does anyone ever end up with a claim that allows garnishing future wages (that do not exist and are not guaranteed to exist at the time the loan is issued)? The whole point of a loan (of any kind) is that it comes with risks. Different types of loans have different risks, and allow ownership claims of more or less things distributed in time and space). But no loan is risk-free, and so the idea that a loan provides an ownership claim of something that only notionally exists doesn't seem particularly strange.
    - geye1234 3y ago
      I understand that. But if I own something that's only notional, it would seem to be saying that I own something that doesn't exist. Which is impossible. Obviously I have claimed a right to $200k of future revenue streams Bob is able to provide me with (plus interest). So ISTM that the 'asset' I would claim to own is Bob himself. I don't own a house or company stock that provides me future revenue streams; I would claim to own a share in a person that provides me with the same. This seems the only logical way to understand the situation.
      - PaulDavisThe1st 3y ago
        You have a claim on something (Bob's labor) that might provide you the principal plus interest that you lent Bob, or it might not. But you do not own it. You lent Bob the money with (hopefully) a clear understanding that in so doing, you could end up not receiving back some or all of the principal and interest. You adjusted the terms in various ways to decrease the chance of that happening, but you did not do this by acquiring ownership of anything.
        geye1234 3y ago
        But again, "Bob's labor" is purely notional. It doesn't exist. I can't have a claim to it as a free-floating entity independent of actually-existing things. If I have a claim on Microsoft's future revenues, this implies that I own a share of Microsoft. If I have a claim on Bob's future productivity, this implies that I own a share of Bob.
sidewndr46 3y ago
I'm not sure where you got your idea of stock ownership, but you're describing it backwards for normal stock you buy at your broker. You would only have those ownership rights if you have a special class of stock, which is not something you normally buy at a stock exchange.

PaulDavisThe1st 3y ago

https://www.investopedia.com/ask/answers/08/nonrecourse-loan-vs-recourse-loan.asp https://www.investopedia.com/ask/answers/08/nonrecourse-loan... The full-recourse loan instrument gives you access to any other assets Bob may have (including future assets such as wages).

geye1234 3y ago
But these 'assets' are entirely notional. They may not really exist. They may start existing at some point in the future, or they may not. How can I claim ownership over something notional?
- PaulDavisThe1st 3y ago
  How does anyone ever end up with a claim that allows garnishing future wages (that do not exist and are not guaranteed to exist at the time the loan is issued)? The whole point of a loan (of any kind) is that it comes with risks. Different types of loans have different risks, and allow ownership claims of more or less things distributed in time and space). But no loan is risk-free, and so the idea that a loan provides an ownership claim of something that only notionally exists doesn't seem particularly strange.
  - geye1234 3y ago
    I understand that. But if I own something that's only notional, it would seem to be saying that I own something that doesn't exist. Which is impossible. Obviously I have claimed a right to $200k of future revenue streams Bob is able to provide me with (plus interest). So ISTM that the 'asset' I would claim to own is Bob himself. I don't own a house or company stock that provides me future revenue streams; I would claim to own a share in a person that provides me with the same. This seems the only logical way to understand the situation.
    - PaulDavisThe1st 3y ago
      You have a claim on something (Bob's labor) that might provide you the principal plus interest that you lent Bob, or it might not. But you do not own it. You lent Bob the money with (hopefully) a clear understanding that in so doing, you could end up not receiving back some or all of the principal and interest. You adjusted the terms in various ways to decrease the chance of that happening, but you did not do this by acquiring ownership of anything.
      - geye1234 3y ago
        But again, "Bob's labor" is purely notional. It doesn't exist. I can't have a claim to it as a free-floating entity independent of actually-existing things. If I have a claim on Microsoft's future revenues, this implies that I own a share of Microsoft. If I have a claim on Bob's future productivity, this implies that I own a share of Bob.

sidewndr46 3y ago

I'm not sure where you got your idea of stock ownership, but you're describing it backwards for normal stock you buy at your broker. You would only have those ownership rights if you have a special class of stock, which is not something you normally buy at a stock exchange.