I never really understood why the stock market exists. It doesn't seem to serve any practicle use, and really hurts the economy, since when stocks drop, people panic. Even more so when recessions are declared.
Can anyone help clear this up with me?
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Excuse me while I laugh at your ignorance.
Okay, I'm done. The stock market is collective speculation in companies. To put it simply, it's for people to gamble on which company will do best. This is true of stock in large companies.
But there's an important role served by the stock market- providing money to businesses. As the owner of a say... book store, you originally own 100% of your business. On the stock market, you can sell a percentage of your company. The people who buy stock (a percentage of your company) are the share-holders. If you own a large chunk of the stock (at least 5%) you will generally have a direct say in a company- if it's classified as a corporation. When businesses start, they can choose to become a corportation, share-holder owned.
Larger corporations such as Exxon, Haliburton, and Enron are mainly just there for people to gamble on...
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At 12/7/08 05:40 PM, KeithHybrid wrote: I never really understood why the stock market exists. It doesn't seem to serve any practicle use, and really hurts the economy, since when stocks drop, people panic. Even more so when recessions are declared.
Can anyone help clear this up with me?
I think your conclusion is quite correct but your reasoning leaves something to be desired, if it weren't a stock market falling that caused panic it would be some other metric of economic health.
The stock market is stupid and bad because it's basically a giant casino that allows people to make money without performing any work, or producing any useful product or service that society makes use of. It also has the effect of giving investors a per dollar influence on the behavior of business, essentially creating an democracy of purely one dollar one vote within the economic system which determines the majority of how the majority of people in these systems will spend the majority of their time on the planet, working in these fiscal democracies.
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Companies need money, from investors, so they can carry out business operations, to expand, to employ people etc etc.
Without the share market, the only people who would invest n your company are ruch, already established busniesses, and firstly, there are more businesses in need of investors than there are large companies willing to invest, and two, because these companies would be one of only few investors in your company, they would own too much of your business, which is not good for you.
The stock market allows anyone to invest in these companies, which is good becauseit makes it a hell of a lot easier to get investors, and ownership is spread so thin that the investors have little power individually over your company.
Throw in at the same time that these investors are also making money, which they can invest furthur so that a company can grow even larger, creating more jobs etc., its great for the economy.
I apoligise for the lack of eloquence in that btw : /
Yes yes the point of the stock market is so that companies can efficiently get investment, This could be done in many other ways without the major negatives I already mentioned.
hey could take out more loans, or take on more partners, which would be awful because then theyd have to share decision making with a larger community hmm... wait...
They could offer profit sharing to workers in exchange for lower initial wages in effect netting them virtual capital to work with.
The US could pass a universal investment system whereby each citizen would be alotted a couple thousand dollars worth of investment money each year which they could then invest in a stock market with equal power to all other citizens, and if their investments panned out they would get the difference in value if it went down or stayed the same tehy'd get nothing, or they could opt not to participate and the amount everyone else received would increase to compensate for the market's need. Oh wait that'd put democracy into the economy, what an awful Idea.
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At 12/7/08 05:46 PM, RWT wrote: Excuse me while I laugh at your ignorance.
Okay, I'm done.
What a dick. God, this guys like me, but... different in some key way I can't think off right now.
The stock market is collective speculation in companies. To put it simply, it's for people to gamble on which company will do best. This is true of stock in large companies.
He wasn't asking what type of role in plays in the economy, he's asking WHY it's there. What fundemental rule in human psychology leads to it.
We have police because we're afraid of being robbed or raped, phone booths because some people don't own phones, why stock markets?
But there's an important role served by the stock market- providing money to businesses.
Exactly. Perfect. Correct answer. If you just said that, without the douchebaggery at the begaining, you'd be great.
Anyways, OP, it's like he said; it provides money to businesses. If I start a company, my incentive to sell stock is to get a lot of money, upfront, to make the company take off in exchange for slightly less profit margin when it gets to richville. If I'm Joe Shmoe, my reason for buying stock in a company is that after shelling out that money I start getting paid a dividend by that company, and can possibly resell the stock. Like building, renting out, and eventually selling a house.
Hahahahahaha, LiveCorpse is dead. Good Riddance.
As long as you buy stock, you earn special rights. I could use some myself.
At 12/7/08 05:40 PM, KeithHybrid wrote: Can anyone help clear this up with me?
It's the one of the pillars of modern Capitalism (the foundation being money).
People buy stocks. What happens here is that people pay a business in order to become a shareholder, or someone who would share in its profits. In this way, businesses get money from those who buy its stocks. When the business profits, the business gets even more of a profit and gives some of this money to the shareholders (the buyer of the stock), since they share in the business' profits.
Stocks thus serve to help fund a business, and to help give people money. When people buy stocks, this gives the business capital (or money) in order to continue operating. When the business profits, then people get some of the profits from the business. In this way, both people and corporation make money.
At 12/8/08 02:57 PM, Achilles2 wrote: stuff
Jeez, I can never get anything right in my first post.
OK, I should say that there are two types of stock. One type allows people to have a say in what the business does. The other just allows the stock-buyer to receive money from the company when it profits (called "dividends").
To put it in a nutshell, stocks are the easiest way for businesses and businessmen and women to make money.
At 12/8/08 10:57 AM, yinyangman wrote: As long as you buy stock, you earn special rights. I could use some myself.
HEY! You are allowed to post on NG's Politics forum. That is a special right in itself. Not like the punks on the general forum. Late.
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