Re: What is a share or stock of a company really mean?

From: Email Invalid (email_invalid_at_mail2world.com)
Date: 07/29/04 

Date: 29 Jul 2004 16:45:59 -0700

kevindotcar@yahoo.com (kevincar) wrote in message news:<60bf9d3f.0407291017.6d0b3abc@posting.google.com>...
> email_invalid@mail2world.com (Email Invalid) wrote in message news:<8a9be796.0407281242.156aa20c@posting.google.com>...
> > Well I think another way of asking this question is that aside from
> > dividends and capital gains, what possible reason would there be to
> > acquire and trade in shares? I mean without these reasons do stocks
> > still serve some purpose?
>
> Well... this is actually a very good fundamental question.
>
> IMHO, buying securities is a lot like buying real estate-
> location, location, location... You merely hope the
> investment gains in value for a given amount of time within
> your "business plan."
>
> ...in fundamental principle it's
> merely a personal property right to capital assets that can be
> bought and sold (If it's preferred, otherwise it's a
> classical-economics intangible good; right to vote), unless
> you count dividends, which isn't that much usually.
>

Well with real estate and art and antiques, etc, it is very easy for
me to understand that these things have intrinsic value. Why do I want
that painting? Because it makes great decoration in my home. Why do I
want that beach house in Malibu? So I can go surfing in my backyard
and enjoy the great view of the ocean.

In fact, with these things, their intrinsic value is such that I might
never want to sell them. Yes they have value also in terms of
appreciation of their price but I could easily understand wanting to
hold on to them forever and giving them to my heirs to enjoy forever
and never taking advantage of its capital gains aspects at all.

And so I understand why I want to buy these things and why others
would want to buy these things without even having to consider capital
gains aspects.

But it is hard for me to understand what that "intrinsic value" of
stocks are so that is why I ask "What is a share or stock of a company
really mean?" I know what owning real estate or art means apart from
it going up in price. But stock, I really don't understand it at a
fundamental level. I can tell you this much, I (and I'm sure most
others) didn't buy it so we could get proxy statements and vote each
year and if that is its "intrinsic worth" then it can't justify alone
why people keep bidding up the price of shares (as people do with real
estate or art).

So for me, it has "value" because this belief that hopefully somewhere
down the line someone will pay more for this share than I paid for it.
But apart from this I don't know what "value" stocks have in and of
themselves. Sorry if I sound confused but I know many people who also
have no idea what owning shares really means.

> I have had MANY conversations with people relating to your
> question- and not one agrees with me, but they are typically
> investment wholesalers and brokers... not exactly unbiased of
> opinion :-)
>
> My personal feeling is the stock market is really
> just another form of legalized gambling... Yeah, you can show
> me graphs that given indexes of funds "always" grow over time,
> but it's still just a fiction, because your OVERALL cost of living
> will ALWAYS exceed your income (insert smiley here :).
>
> You could ask the same about most things people invest in...
> rare coins, rare art, old cars, anything... There are many
> people who should not invest in the stock market, just as
> there are many people who should not gamble or drink.
>
> Furthermore, I think stocks are very overrated given this fact;
> the total investment in the stock market is SEVERAL TIMES the
> actual capitalization of the companies that the market actually
> invests in... can you say "tail wagging the dog?"
>
> K.C

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