That’s not investing


I just hate it when people talk about their investments in the stock market, and believe they are somehow entitled to a return on that investment. As if the money they’ve used to purchase shares of a company is the same as giving a company money to get started, expand, or develop new and/or improved products or services that benefit society.

Well let me set the record straight here.

Transferring [exchanging] shares of a stock, between individuals thousands of times removed from the original investor(s) in a business, is not an investment. That money doesn’t go to help the business, and it definitely doesn’t help the economy. The only ones who do benefit are the brokerage houses that enable the exchanges. It’s not an investment in anything, and no one is entitled to a return on that money.

Warren Buffet invests. Venture Capitalists invest. They put money at risk giving it directly to businesses, new and ongoing, to get started, to prop them up, expand, or improve on the products and services produced by those companies that benefit society. Those are the ones who deserve a return on their investments.

Buying shares on the NYSE, NASDAQ, or the myriad of other exchanges around the world, is no more an investment then trading baseball cards and other collectibles, or plunking down $20 on the passline in Craps. It’s just a legalized form of gambling. The only difference between going to Vegas, and buying shares of stock on the various stock exchanges, is Vegas makes no illusions of its true intent.

It could also be said that putting money in the stock market may even hurt the economy. By shifting money to the stock market, there’s less money available for banks to lend to businesses, to create jobs producing products and services that benefit society, and to lend to individuals for the purchase of homes, cars etc. which incidentally was the original purpose of banks, rather than shifting it to their trading desks.

Somewhere along the line, that concept gave way to the fantasy of an “ownership society” and the promise of great riches, along with the destructive nature of companies focusing purely on profits at any cost, even to the detriment of what’s best for society.

The stock market is nothing more than a scam, designed buy hustlers, in order to siphon money from the working [producing] class and transfer it to them, and until the US and the rest of the world wake up to that reality, the middle class is destined for extinction, and what countless thousands of people have fought and died for, over the past 200+ years, will have been for naught.

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4 Comments

  1. While there is some merit to your argument, it would be difficult, if not impossible, to get the *first* purchasers of stocks (the ones that do inject capital directly into companies) to invest without the availability of a market for them to be able to sell that ownership share later. Having *some* liquidity is critical to being able to attract investment. VCs and similar investors earn more on their investment because of higher risk. High frequency traders, OTOH, are leaching money out of *other* investors, and creating the illusion you’re talking about.

    • That’s another misconception.

      The mere operation of a successful business produces profits which are then returned to investors as a return on that investment. They don’t have to sell the business to realize a gain.

      The mere fact you believe that is what has led to the fascination with the stock market. A fascination that causes companies to seek profit above all else, exploit employees, and even sacrifice safety and quality.

      Contrary to popular belief, businesses aren’t in business to make a profit. Businesses are in business to provide a product or service society needs. Companies that focus on producing the best products, and creating an environment where employees can thrive, are always the most successful.

      Once companies start letting passive investors dictate policies, growth and innovation will always be limited.

      Certainly it is a lot more complicated, but in essence the stock market has done more to limit innovation in this country and reduce our standard of living than any government regulation or tax policy could ever do.

  2. “By shifting money to the stock market, there’s less money available for banks to lend to businesses, to create jobs producing products and services that benefit society, and to lend to individuals for the purchase of homes, cars etc.”
    Don’t see how a bank plays into this. When I buy a stock, someone else is selling. That person now has more money to buy things in society. It is a net zero minus transaction costs.

    “The mere operation of a successful business produces profits which are then returned to investors as a return on that investment. They don’t have to sell the business to realize a gain.”
    Investors can receive profits in a number of ways, capital gains being one. Only approx. 25% of public companies offer dividends.

    “Contrary to popular belief, businesses aren’t in business to make a profit. Businesses are in business to provide a product or service society needs.”
    You are going to start a lemonade stand. You are going to have the best lemonade anyone can buy, everyone will love you. You are going to sell each cup for $2.50. After subtracting your costs of raw materials, salaries to your employees, taxes, et. al. you will earn $0.00. Now tell me ex-ante, why would you ever start this business in the first place if you will get exactly nothing out of it?

    “Companies that focus on producing the best products, and creating an environment where employees can thrive, are always the most successful.”
    What is your definition of success? Profits should factor into it somewhere

    • Now tell me ex-ante, why would you ever start this business in the first place if you will get exactly nothing out of it?

      You’re right! You wouldn’t! At least you wouldn’t if you knew that up front.

      But then what are we talking about here? You need to do your homework. Is there a demand for lemonade in your neighborhood? If there is, then you’ll be able to charge whatever, and you’ll make a profit, assuming it’s good lemonade, and you treat your customers well. But if there is no demand, then why would you open a lemonade stand in the first place?

      Businesses are in business to fill a need of society. To provide jobs etc. Profit is merely a system of keeping score, on how well you do that.

      When profit is the only motive, than any means a company employs to achieve that profit is justified, including fraud, and you shouldn’t be complaining when you’re duped.

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