Ha. You can't bring yourself to admit that, yeah, the one of the greatest financial innovations in history and the beating heart of the greatest capitalist economy in the world that has benefited generations is, in fact, very little like Bernie Madoff using new investors to pay off the older investors while providing no product of value.

Not sure why, seems all are in agreement, they are similar, not the same but in the one construct I was looking at the need for an ever expanding user base they are.

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Just Triing
Triathlete since 9:56:39 AM EST Aug 20, 2006.
Be kind English is my 2nd language. My primary language is Dave it's a unique evolution of English.

I have not read that anyone agrees with you. FYI

By the way, your example here explains short term movements. A stock has a calculated value, per an analyst using a financial forum a and growth model. Then, there is reality of the actual price the stock trades for. As a stock becomes overvalued, eventually, people who own the stock sell it and buyers run out. The stock falls.

The part you’ve ail to realize is this-

At some point the stock becomes undervalued and buyers return and buy the stock. It may even be the same buyer that sold it in the first place and he chooses to buy it back again.

Short term movements are more behavioral based than financial formula based. This is where people in the know benefit and people that don’t know what they are doing lose out. Timing plays a big role in the short term.

Most people understand the concept of inflation and the need to invest and also create an income stream at retirement. I think the important question is to ask you what you do with your money if you chose to not invest in the stock market?

What do you do?

No it won't. A lot of people are in the stock market because it offers them high liquidity, so radically changing that fact by introducing a "no buyer" hypothetical may make many current stock holders very unhappy. However, there's nothing that says you have to have a buyer of your stock in order to make money with a stock. I've never had a buyer for either of my companies' stock and they make me money year in and year out.

It is in a manner of sorts. It is a way for people to invest with very little effort on their part. It is a big confidence game. In the last few decades fueled by cheap money. Which gives little alternative unless you want to actively invest in a small business. Land offers the same opportunities. Around here agricultural land has been the best investment for the last 15 years because money can be borrowed so cheaply.

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They constantly try to escape from the darkness outside and within
Dreaming of systems so perfect that no one will need to be good T.S. Eliot

Fortunately, there is an ever expanding user base for the foreseeable future. Have you seen the global population?

With regards to the 20 and 30 year olds just not buying, it simply won't happen. Right now, Apple pays a total dividend of ~$14.2B out of its annual earnings. If someone is to believe their earnings stay even close to that, how low will the stock go before people can't resist it? Much like paying for passengers to go stand-by, most have a price.

You are focused on too large a picture. I recently invested in a small company. A few years later, someone bought said company, and I made a decent profit. You can argue that said company had no value, but if desired, over the next five years, the company could have issued dividends greater than my investment. Management (and investors) chose to roll those profits into the company for greater growth (and greater dividends or sale price). Was this company a pyramid scheme? If new buyers hadn't come along, the revenue stream still provided a value. Granted, the earnings could drop and the company value along with it, but the value largely came from the earnings and so long as those exist, the company value does also.

I have been thinking about this. If the majority of stock in the market is owned by index funds which buy stocks that are representative of the index not on the basis of felt value of said stocks the stock market is no longer a sorting mechanism for profitable vs non-profitable companies. What do we have then?

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They constantly try to escape from the darkness outside and within
Dreaming of systems so perfect that no one will need to be good T.S. Eliot

Index funds are made up of companies that qualify for the index. The S&P 500, Dow 30, or Russell 2000 as examples- have companies that move in and out of the index based on market caps or industry sector.

There are plenty of stocks that are majority owned by institutions for mutual funds than private, retail investors. That I would agree with.

Apple has value. It earns billions of dollars per year. When you buy a stock you own a fractional share of those profits. It is that simple. The reason there are always buyers is because they are buying earnings (or in some cases a prediction of future earnings).

A company's stock price is calculated by adding up all future dividends that the company will distribute and discounting them to the present.

The shares have value because you have a claim on those dividends as a shareholder.

The reason the stock price fluctuates is because market participants do not agree on the future profitability of the company and the amount of those dividends.

The difference between a legit company and ponzi scheme is that a company generates cash through operations. A ponzi scheme only generates cash through new equity contributions, and those eventually dry up.

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Strava