[quote=“Nuwanor”]
Companies lose their “soul” by going public[/quote]
I completely agree.
Personally, I think we’d be better off if that wasn’t an option. I hate the stock market and wish it didn’t exist. I’m fully prepared to be chastised for that comment.
[quote=“Tiare”][quote=“Nuwanor”]
Companies lose their “soul” by going public[/quote]
I completely agree.
Personally, I think we’d be better off if that wasn’t an option. I hate the stock market and wish it didn’t exist. I’m fully prepared to be chastised for that comment.[/quote]
What alternative would you see for companies to raise capital if the stock market didn’t exist? VC’s are great if you’re small but they just don’t have enough clout when you are larger. Company growth would be crippled because they couldn’t borrow enough to expand, invest in new equipment or purchase other companies. Love it or hate it, the stock market exists to add liquidity to the system. Without it companies could only borrow from banks at high interest rates (the rates would have to be high to compensate the bank for the length of time the money is tied up).
Right, so there is a need for some kind of stock market, for the larger companies/larger investments at least. But the reason companies have to push $$$ to meet quarterly numbers is because people will sell out right away if the numbers are not met.
Let’s say you’re in a partnership with 3 of your buddies, and you buy a bar, and you put in X dollars each. After a year, money’s not as good as hoped, and one of you wants to sell, so you figure out the market value, you make sure the company or the individuals can afford to buy the shares back at whatever value the share is worth. But if the company really can’t afford it at the moment, or the individuals need some time to get the cash together, you don’t just pull out anyway and get your money guaranteed, you have to wait until it can be done safely, or you pay over time, or both.
Now expand this to the stock market. Why should a company be required to pay out right away whenever a shareholder decides the quarterly report numbers didn’t show as much profit as they had hoped? Why shouldn’t that person be treated just like a smaller company with fewer shareholders would be treated, i.e. a price is established for the sale, the company reviews its finances, maybe has some time to look for another buyer to replace the shares at a similar price, and in a few days or whatever, the money is paid.
In other words, why should the process be instantaneous? Maybe people should be able to place a sell order but all sell orders are handled on a once-weekly basis. Then everyone wanting to sell that week, at the end if the week, the share price is evaluated, the shares are sold, the dollars paid out, and/or the new investors come in. Even once daily numbers would be an improvement I would think.
That’s just a simplistic example, but it’s that kind of slow down and “reality-check” that might reduce speculation and need for companies to provide regular, instantaneous gratification at pumped up rates of return.
We’re into the too big to fail arguments again.
If the company is too big to require money, then maybe the company is too big to exist and by removing the stock market they would be foreced to break into smaller, specialized entities providing fewer services to smaller regions, no?
Two tongues, your example pretty much is the stock market, except the valuation is done outside the company and the value of the share is assessed relative to the investment price : dividend ratio , likly size and chance of dividend being paid
I think the issue I have with the market is that it is a parasite sucking money out of the system without addiing anything. Maybe this is my own poor understanding, but to me the markets are not achieving anything.
What I’m thinking of is more of a slow-down of the process, to reduce speculation and drive to provide immediate gratification. Investors move in and out in bunches and the same prices, giving time to the company to bring in replacements or borrow funds or whatever, and reducing the huge immediate gains/losses. The valuation could be done inside the company, with assistance from “neutral” outsiders for oversight to prevent fraud and gaming.
without ‘American Style Capitalism’ a very small handful of us would have ever come to TW, Forumosa would not exist and all the teaching cats would be back in their whitebread homelands swinging a hammer or pushing a broom.
That’s a strange leap you’ve just made there, who knows what that world’d be like, maybe America’d be a better place and people wouldn’t want so much to run away to TW to teach English and get slanty poon, or conversely maybe people’d be less of the “America’s the only good place and everywhere else blows” mentality and more people’d try overseas living - and have the financial wherewithal to do so.
Huh? This is not how the stock market works. The transactions occur outside of the company. The company doesn’t pay out anything to anyone. That’s an entirely different thing which a company may or may not decide to do for completely different reasons. What happens when a share is traded is you have someone who owns a share who wants to sell it. He basically has to offer it to potential buyers at such a price that someone will buy it. By that I don’t mean he has to literally ring up a whole bunch of people and say, “Hey, do you want to buy my share for $1? Okay, how about 90c? What, you want it for 80c?” Thankfully, it’s more streamlined than that. Obviously, when there are lots of people who want to buy it, he can get more than if few people want to buy it. It’s supply and demand.
As for the speed of the transaction, I think you’re confusing two things. The first is that, yes, it does happen fairly quickly these days. So do all sorts of things. For instance, people don’t have to wait months for a ship to sail from one side of the world to the other to deliver a letter. Instead, they can send an email pretty well instantaneously. So what? Convenience can actually be a good thing (in the same way that a stock exchange means that people don’t literally have to go to market with a pig under their arm and let people rub its belly to convince other people to help them expand their farm, or get on the phone and ring up a whole bunch of people). The speed of the transaction in the stock market is quite possibly a very good thing because it allows someone to have high liquidity for any number of purposes (such as being able to pay someone to fix a leaky roof tomorrow morning, instead of having to wait ages for money to change hands). Anyway, the other thing you’re confusing all of that with is how quickly buyers and sellers may find each other, and at the right price. Some shares are traded in very large volumes because they’re on a lot of radars, so to speak, so buyers and sellers can be matched almost instantaneously. On the other hand, some shares are very much off most radars, so to speak, and so it can take a very long time for buyers and sellers to find be matched at an agreeable price.
As to the company reviewing its finances or anything else to try to make everyone happy, again, this very much depends upon the company. I have no doubt that there are companies where one shareholder (usually the founder and CEO) owns the controlling stake and continues to run things as he sees fit without having even the faintest idea or care of who is trading the company’s shares, in what volume or for how much. Other people take delight in being “activist shareholders”. A whole lot of other people run around with more activity than a hiveful of bees. Again though, so what?
The stock market is indeed often more circus than anything else, but the part of your post I quoted (and your posts in this thread in general and on economics and finance elsewhere) are so muddle-headed it’s quite bizarre. At least understand how the most basic processes of the market work first.
[quote=“itakitez”]We’re into the too big to fail arguments again.
If the company is too big to require money, then maybe the company is too big to exist and by removing the stock market they would be forced to break into smaller, specialized entities providing fewer services to smaller regions, no?[/quote]
And that’s when the big company crashes, and everyone wonders how that was ever possible, and why 30,000 people just lost their jobs, etc.
Shareholders are supposed to provide a check against stupid decisions, as their share represents the equivalent amount of decision-making power. But of course, one or two guys hold the majority of the shares and just don’t care what the shareholders might think, assuming they have any opinion at all.
[quote=“lbksig”]
What alternative would you see for companies to raise capital if the stock market didn’t exist? VC’s are great if you’re small but they just don’t have enough clout when you are larger. Company growth would be crippled because they couldn’t borrow enough to expand, invest in new equipment or purchase other companies. Love it or hate it, the stock market exists to add liquidity to the system. Without it companies could only borrow from banks at high interest rates (the rates would have to be high to compensate the bank for the length of time the money is tied up).[/quote]
I guess this is what I have a problem with. Why do companies have to be so big? What’s wrong with waiting to expand until you have enough money to do so? If companies had to actually raise money through the business in order to grow, then they’d really have that money to do it. There wouldn’t need to be any speculation. Under that kind of system, there wouldn’t be Wal-Marts on every corner, putting every mom and pop store out of business. With the market how it is, all a company needs to do is sell enough shares to gain enough money to dominate the market, then all their competitors are put out of business and they now have a monopoly and can do whatever they want. How is that a good system? Yeah, if companies actually had to raise money on their own, it would take a long time to grow…but quality would matter again. Small businesses would have a chance again. Instead of focusing on pleasing share-holders and appearing to have higher profits at any costs, owners would actually focus on pleasing their customers in order to stay in business.
Tiare…just a question.
Do you have any background or experience in actual “business”’?
Your questions would lead me to think the answer might be…no.
But I don’t want to pre-judge you without knowing. You are aware, aren’t you, of the need for even a “small business” to maintain a relationship with a bank for money needs?
As to the “pleasing share-holders” comment…do you know what a share-holder is?
Do you know why share-holders exist?
Hint…share-holders are investors in the company they hold shares in. Its their existence that allows the company to exist.
That allows economies of scale, and better R&D budgets. To the consumer, this means cheaper, and newer products.
The speculation does not affect the company’s revenue, it affects the shareholders’ revenue. The company gets its money from the first time they emit shares, then the shares are out of their control. Most of the money companies have come from sales. How can a bank like Societe Generale can afford 6 billion euro loss and not whine much about it? Because they make far more than that.
Pop and mom store will have a chance again when CONSUMERS decide so.
[quote=“Tiare”]
I guess this is what I have a problem with. Why do companies have to be so big? What’s wrong with waiting to expand until you have enough money to do so? If companies had to actually raise money through the business in order to grow, then they’d really have that money to do it. There wouldn’t need to be any speculation. Under that kind of system, there wouldn’t be Wal-Marts on every corner, putting every mom and pop store out of business. With the market how it is, all a company needs to do is sell enough shares to gain enough money to dominate the market, then all their competitors are put out of business and they now have a monopoly and can do whatever they want. How is that a good system? Yeah, if companies actually had to raise money on their own, it would take a long time to grow…but quality would matter again. Small businesses would have a chance again. Instead of focusing on pleasing share-holders and appearing to have higher profits at any costs, owners would actually focus on pleasing their customers in order to stay in business.[/quote]
Walmart didn’t get large because of their access to capital. They got large because they cut prices as close to production cost as they could. The stock market wasn’t the factor, because if it was, then Walmart would have been beaten from the beginning by Sears, K-Mart, Target and other retailers who were there before them.
Larger companies provide lower cost goods to their customers. They can do this because of the leverage they have by purchasing large quantities, running production lines in 2 or 3 shifts instead of just one, shipping a full container of goods or a full truckload of goods to the store, etc. They want to get big so they can charge less and gain more customers. They focus on pleasing their customers as well as their shareholders, because if customers leave the company goes out of business, no matter how large or small.
Shareholders want to see market growth that leads to either higher stock prices or higher dividends. That’s the payoff for lending a company funds. If the company doesn’t perform up to expectations, shareholders will get pissed and (sometimes, but rarely) vote in a new board. They usually just sell their share and find a company that they feel will give them a good return on their investment. There is no link between market share and outstanding stock.
If a company had to wait until they actually had all the money in the till to expand, they might never expand at all. There are opportunity costs for tying up that money. If the company can make more money purchasing and selling additional product than the interest they pay on the debt, they will borrow for the expansion and use cash for more product. In your scenario there aren’t many large companies, only small businesses who can’t ever grow. They’ll be locked on that corner because they can’t get access to enough capital ever. Prices will be higher for consumers
I do understand what share holders are… 
I admit that I’ve never opened my own business, but I have worked with several mom and pop small business type places. I come from a very small town, so for a long time that’s all there was. Perhaps I’m biased because that’s the side I saw…we didn’t even have a wal-mart until 03 or 04.
But aren’t CEOs paid ridiculous amounts of money in order to keep share prices high? Isn’t that their primary goal? That’s how I thought their salaries were legitimized. Doesn’t the COO take care of the day-to-day running of the company stuff, so he/she’d be the one to make sure the actual company was making sales? If these things are true, then doesn’t it logically follow that share prices are the top focus for businesses since CEOs are usually deemed more important than COOs?
Anyway, I don’t think most consumers can choose to bring back small business because usually their pay is so lousy that they have to go to the larger chains. Of course, if the people at the top dropped their pay to a reasonable amount, and spread that money among their workers, then these people could choose to shop at other places…but that wouldn’t be good for business, would it?
Taire, for someone who I’m assuming has a university degree, what you write is very very depressing. I have none of the patience that TC has shown.
Why do share prices need to be high:Share prices need to be above a certain level or owner’s equity is wiped out and the company is insolvent and will need restructuring. There’s also a benefit to issuing shares in lieu of debt. While you may dilute owner’s equity, you do not have interest payments to make. Shares also lead to a more fluid marketplace. While a whole business may be expensive and hard to sell, Shares are quite easy thansk to a fluid marketplace.
Why are CEOs paid so much:That small small minority is paid so much because so few people can do it. Anything that happens is on your ass and you are on call 24/7. When you get it right, you make everyone a lot of money. When you don’t, well good luck finding another job. You may also deal with a board of directors that feels very differently than you.
I’d recommend either of Hernando De Soto’s books to bring you up to speed why American captitalism rocks and socialism and mercantilism don’t. Because if you are that ignorant about the benefits of large companies, I very much doubt you even have a vocabulary able to differentiate between good and bad business practices.
Small businesses suffer from intense regulation and paperwork requirements. If it took George McGovern failing at business to realize how hard it is, then it’s probably the same case for you.
They are paid to keep meeting market expectations, grow the company, and bring profit. All of which keeps share prices the same or increases them. It depends on how the competition is doing. If the competition is losing market share while you are gaining it, then maybe the CEO is doing something right. Conversely, if they are gaining and you are losing, your CEO is doing something wrong.
[quote]
Anyway, I don’t think most consumers can choose to bring back small business because usually their pay is so lousy that they have to go to the larger chains. Of course, if the people at the top dropped their pay to a reasonable amount, and spread that money among their workers, then these people could choose to shop at other places…but that wouldn’t be good for business, would it?[/quote]
First define “reasonable” for me. It’s a great sound bite but it lacks anything empirical in which to measure against. Now, do consumers go for Walmart’s low prices because their pay is so lousy or do they go to Walmart because they can get get more for their money? If it’s because their pay is lousy, would they have been able to afford to purchase from the small businesses, whose costs are higher, as from Walmart? Probably not. If they were shopping at the small business but then went to Walmart, it was to make their dollar go further.
Wages are tied to productivity. Productivity has increased over the past 20 years. Labor isn’t as valuable as it once was and knowledge is more valuable if not essential. You just don’t need as many people to do the same tasks now that you have computers, especially in manufacturing. If you redistributed the wages without any increase in productivity, you’ll only increase inflation. Everyone will have more money but then prices will go up because demand increased without supply increasing.
Huh? This is not how the stock market works. The transactions occur outside of the company. The company doesn’t pay out anything to anyone. That’s an entirely different thing which a company may or may not decide to do for completely different reasons. What happens when a share is traded is you have someone who owns a share who wants to sell it. He basically has to offer it to potential buyers at such a price that someone will buy it. By that I don’t mean he has to literally ring up a whole bunch of people and say, “Hey, do you want to buy my share for $1? Okay, how about 90c? What, you want it for 80c?” Thankfully, it’s more streamlined than that. Obviously, when there are lots of people who want to buy it, he can get more than if few people want to buy it. It’s supply and demand.
[/quote]
Thanks for the lesson, Guy, I think the point is still valid though - that is, slowing the transaction rate down as well as slowing down the rate at which the stock price can change down. The stock price is what people are willing to pay for a share and what people are willing to sell for a share, and has no direct correlation then to the actual value of a company e.g. assets, revenue, income forecasts, etc. A company’s assets could be devalued by half due to fire say, but if people wanted to buy at a higher and higher share price, and shareholders were willing to sell at that higher share price, the share value would still go up.
If, on the other hand, a company knew that it’s stock price could not go up or down more than n% per day, for example, or that the company could not profit more than x% per quarter, for example, it would change the whole dynamic of the market - once a company was on course for that level of profit or share growth, it could then look towards other, non-profit based goals, such as new technology, opening new businesses and finding more jobs, giving back to the community, etc.
I guess the point is, the goal should not be profit before everything else. Business started out as a way to feed the family and have a stable, secure life, but it has grown into this ridiculous behemoth that controls government and puts society and stability second or third after profit. To get it back on course with societal stability and security as it’s main goal, the unlimited profiting has to be curtailed.
Back in the real world, this has to mean putting limits on profitability.
The problem is the scale of the wages and how you define productivity. In big finance, you can be far less productive than another guy and still make a million dollars a year. Shit, you can lose money for the company, if your bosses have faith you’ll do better next quarter. Whereas I can bust my ass in sheetmetal making 40k a year, do an excellent job, and still be in fear for my future and that of my family. And the definition of productivity these days is sometimes rubbish - ability to make more dollars out of existing dollars? Again, dollars is the means of measurement and end goal, and that’s a shame. How about instead we make the measure of productivity the amount of people we can hire to decent paying jobs for a stable period of time, and still produce at the rate needed for the company to produce a profit of X% per year? How about we make efficiency of production the top goal, where efficiency is producing the right number of items to meet demand or the right amount of quality service to meet demand without having too many or too little people?
Money’s an easier measure than these things but it takes humanity and society out of the picture.
I believe for me it’s more of a moral issue than a money issue. I’m just against the immorality that big business and profit chasing causes. I wish that we lived in a world in which living a happy life was more important than having a larger bank account. Yes, I understand that I’m very idealistic, and that my ideas can’t fly in the current world we live in, but I believe that I’m allowed to have my opinions, and my hopes that someday people will give a crap about what they do to each other and the environment. I think the oil spill is a pretty good indication, among other things, about why American-style Capitalism isn’t working. For those that feel they need to insult my intelligence in order to show that they don’t want to hear my opinions, that’s fine. That’s your right. I also have the right to be a socialist and believe that a human life is more valuable than money.
Here here! Money as the (by far) primary measure of a company’s well-being and determinant of future success is a HUGE problem. Outrageous salaries, and the belief that anyone can get those salaries through “gambling” investments, are as detrimental to society as poverty, and serve little purpose. If the maximum salary was $2 million, for example, you’d still find thousands of excellent, excellent people to fill the top jobs, you don’t need to pay 10 million 100 million etc to do it. In the end, money, the accumulation of ridiculous wealth, really is a zero-sum game. Someone getting extremely rich usually means someone else isn’t getting enough, unless you’re printing money.
The problem with socialism that your teachers never bothered to teach you nor learn themselves is that businesses spend their time and capital purchasing political power rather than running their business. This leads to less choice, higher prices, more environmental damage, and less safe products.