11 ms·

This is untrue: "All very true, except that with a share of Google, they're all the same and you arguably know what you're buying..." We've had many, many cor

This is untrue: "All very true, except that with a share of Google, they're all the same and you arguably know what you're buying..." We've had many, many corporate scandals over the years: Enron, WorldCom, Tyco, etc. We know that corporations can lie. The lies are of 2 kinds: 1.) deliberate falsehoods 2.) lies of omission We also know there are many facts that can not be known about a corporation. What is the real value of the software? What is the real value of a patent? Does the software contain a serious bug? Is the patent open to legal challenge? Regarding the danger that Citibank got into, and the near extinction it faced during the financial crisis of 2008, Robert Rubin (who had been director and senior counselor of Citi, during the bubble years) said: "It is not easy to know how much risk is building up on the trading floor." Here you have one of the top people of the company claiming he had no idea what condition the corporation was in. Was he lying? If he was lying, then how can you trust any information you have about the corporation? If he wasn't lying, how can you trust that you know anything about a corporation, when the people who run the corporation have no idea? So how can you ever really know what a share in a corporation is worth? It's at least as much of a mystery as the question of "How much is a computer programmer worth?"

MCRed 12y ago
In all of the examples you mention it was understood by people paying attention the level of risk. I knew there would be a housing bubble and crisis in 2001 because I read an article on mises.org that pointed out the two factors: (Clinton era CRA "reforms" forcing people to lend money to those who couldn't repay, because doing otherwise was "racist", an issue brought up by Barack Obama's class action lawsuit... which, by the way, turned out to be false- when corrected for income there was no racial bias in lending during the period) and Bush's policy of lending money lower then the real cost of it (a result of the dotcom bubble, and by the way, a police that is currently in action inflating the new bubble.) I knew citibank was in trouble. I looked into Worldcom, Enron and Tyco back then as investments and didn't like their books. While the average person may not read a companies annual reports, and the average person may not think about the consequences of forcing banks to lend money and then giving them money at a rate below the market rate, but happily buying the resulting loans (via fannie mae) at market rates... those who are paying attention can. In those cases the info is publicly available.
- mark_l_watson 12y ago
  +1 for mentioning mises.org. Their Web site content convinced me to get out of the stock market in 2007.
  - astrange 12y ago
    I wonder what the return on SPY since 2007 has been… Here's a calculator: http://dqydj.net/sp-500-return-calculator/ http://dqydj.net/sp-500-return-calculator/ 68% with dividends reinvested! Not bad.
    - mark_l_watson 12y ago
      Well, I did slowly get back into the market after 2008. I am in my 60s so my investments are very diversified. I am going for safety, in a chaotic world, rather than trying for maximum growth.
    - MCRed 12y ago
      You forgot to include inflation. This gives you %6 per year. That's great compared to CDs and Bonds but it's not a great return compared to stocks historically. (I think since WWII it was %10 for broader indexes?)
yummyfajitas 12y ago
The lies you mention are not actually information asymmetries between the buyer and seller of Citi shares, so the comparison isn't really very apt.
IanCal 12y ago
> So how can you ever really know what a share in a corporation is worth? It's at least as much of a mystery as the question of "How much is a computer programmer worth?" I think the point is that one share in google is worth exactly the same amount as another, and this fact is easily verifiable by the buyer and the seller. You won't buy a share and then find out that it's actually only worth half of someone else's share, or for some reason costs you money rather than earning you dividends while everyone else is raking it in.
- fragmede 12y ago
  > one share in google is worth exactly the same amount as another Pedantically, they're not. There are 3 public classes of Google stock, publicly traded GOOG and GOOGL, as well as Class B stock, which doesn't have a public ticker symbol. http://economix.blogs.nytimes.com/2014/04/02/the-many-classes-of-google-stock/?_r=0 http://economix.blogs.nytimes.com/2014/04/02/the-many-classe...
  - IanCal 12y ago
    That is very true, thanks for the clarification. If I said "one share of GOOG" would that uniquely identify one class of the stock?

MCRed 12y ago

In all of the examples you mention it was understood by people paying attention the level of risk. I knew there would be a housing bubble and crisis in 2001 because I read an article on mises.org that pointed out the two factors: (Clinton era CRA "reforms" forcing people to lend money to those who couldn't repay, because doing otherwise was "racist", an issue brought up by Barack Obama's class action lawsuit... which, by the way, turned out to be false- when corrected for income there was no racial bias in lending during the period) and Bush's policy of lending money lower then the real cost of it (a result of the dotcom bubble, and by the way, a police that is currently in action inflating the new bubble.) I knew citibank was in trouble. I looked into Worldcom, Enron and Tyco back then as investments and didn't like their books. While the average person may not read a companies annual reports, and the average person may not think about the consequences of forcing banks to lend money and then giving them money at a rate below the market rate, but happily buying the resulting loans (via fannie mae) at market rates... those who are paying attention can. In those cases the info is publicly available.

mark_l_watson 12y ago
+1 for mentioning mises.org. Their Web site content convinced me to get out of the stock market in 2007.
- astrange 12y ago
  I wonder what the return on SPY since 2007 has been… Here's a calculator: http://dqydj.net/sp-500-return-calculator/ http://dqydj.net/sp-500-return-calculator/ 68% with dividends reinvested! Not bad.
  - mark_l_watson 12y ago
    Well, I did slowly get back into the market after 2008. I am in my 60s so my investments are very diversified. I am going for safety, in a chaotic world, rather than trying for maximum growth.
  - MCRed 12y ago
    You forgot to include inflation. This gives you %6 per year. That's great compared to CDs and Bonds but it's not a great return compared to stocks historically. (I think since WWII it was %10 for broader indexes?)

yummyfajitas 12y ago

The lies you mention are not actually information asymmetries between the buyer and seller of Citi shares, so the comparison isn't really very apt.

IanCal 12y ago

> So how can you ever really know what a share in a corporation is worth? It's at least as much of a mystery as the question of "How much is a computer programmer worth?" I think the point is that one share in google is worth exactly the same amount as another, and this fact is easily verifiable by the buyer and the seller. You won't buy a share and then find out that it's actually only worth half of someone else's share, or for some reason costs you money rather than earning you dividends while everyone else is raking it in.

fragmede 12y ago
> one share in google is worth exactly the same amount as another Pedantically, they're not. There are 3 public classes of Google stock, publicly traded GOOG and GOOGL, as well as Class B stock, which doesn't have a public ticker symbol. http://economix.blogs.nytimes.com/2014/04/02/the-many-classes-of-google-stock/?_r=0 http://economix.blogs.nytimes.com/2014/04/02/the-many-classe...
- IanCal 12y ago
  That is very true, thanks for the clarification. If I said "one share of GOOG" would that uniquely identify one class of the stock?