aviet Posted February 28, 2015 Posted February 28, 2015 I have a fair economic understanding, but one thing I have been unsure of for some time is: What it the benefit of the stock market? To me it seems the only considerable benefit of the stock market is that when a stock is trading high, shareholders have more wealth on paper. But it seems to me that it ends there.If a company is making CPUs, this provides huge value to the consumer who can do many things with the CPU he could not do without and it provides money (purchasing power) for the company. A win, win. But if a stock is trading high, it seems to me that there is little value to the company or consumer.I've heard Stef say that when his IT company went public that he lost a lot of time fretting about the stock price. It seems to me that the stock market saps real production and replaces it with the dead wood of the zombie, speculative economy.Can anyone with a better understanding shed more light on this?
surfingthoughts Posted March 1, 2015 Posted March 1, 2015 As someone who has a degree in business I should know more about this than I do but I confess I know very little about this... http://www.investopedia.com/articles/basics/03/020703.asp might shed some light on this I didn't read it but I did use this website when I was studying. The only advantage I could think of is that banks would watch the stock value and make lending choices from this. If a company has more access to capital it could if used correctly use that money to invest in something (in better machinery for example) that reduces the cost per unit that saving could then be pased down to the consumer in one shape or another depending on the strategy of the company. Or the investment could be used to improve quality ect... In a free market I cannot imagine the stock market working in the way that it currently does I mean this unlimited liability stuff is just not free market economics or atleast not in my mind.
GRosado Posted March 19, 2015 Posted March 19, 2015 Stock markets help companies raise financial capital for their needs
J. D. Stembal Posted March 19, 2015 Posted March 19, 2015 The goal of going public with a stock offering is to raise capital for the company. Nowadays, it is more commonly a mechanism to foist overpriced stock on unsuspecting people, so the capital investors can cash in on their investment. It's all voluntary, mind you, unlike taxes, so there is nothing ethically wrong with this behavior. Take the P/E ratio of Facebook before and after the 2012 IPO. It was estimated at 83 in 2010 - http://www.quora.com/What-is-Facebooks-price-to-earnings-ratio. If I remember correctly, it only fell below 70 in the months following the IPO. Today, it trades around a ratio of 74. That is an astronomical ratio! Compare that to Google (26.6), and Apple (17.3), two more established American tech companies. Peter Schiff on two recent restaurant IPOs: https://www.youtube.com/watch?v=gjpsS3hK3ikt=19:00
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