Go, Economy!

[Some Stupid Japanese Name]

Willie pls.

[Anthony]

A big problem with Keynesianism from a policy perspective is that no politician will enact counter-cyclical budget cuts in growth periods.

The stuff he wrote about the slow periods is right on, though, and what's happening now is basically exactly what he predicted would happen.

Monetarism is just a way for rich people to build walls around their wealth. Supply side isn't even supposed to be taken seriously, it's just obvious theft.

The public has to be taught this is what matters. I honestly find it hard to see a light at the end of the tunnel when it comes to educating the public though, so I tend to throw my hands up and try not to worry about it. (Which is actually a very logical move to do from a utilitarian economist point of view.)

[Fe 26]

Im kind of dumb, so bear with me.
When i buy $100000 worth of stock in an IPO, where does that money go?
I always thought it went back to the company, to be used for whatever improvements. But instead it is just gathered into a money vault to just rest and accumulate?
Thats what i gathered from IP's insight into the rich man's world.

Dif will have to correct me on this, as he seems to know more about it, but I think a company only makes money on stock when it issues the stocks and sells them. Stocks on the secondary market don't make them any money (I think).

I'm not mr stock expert, but I would think an investment portfolio would rarely be made completely of stocks that were purchased directly from the issuer.

[Bojack]

Dif will have to correct me on this, as he seems to know more about it, but I think a company only makes money on stock when it issues the stocks and sells them. Stocks on the secondary market don't make them any money (I think).

I'm not mr stock expert, but I would think an investment portfolio would rarely be made completely of stocks that were purchased directly from the issuer.

This is generally correct. Who ever holds the share gets the cash. Companies only usually have their own shares at IPO, if they hold stock on reserve, or treasury shares. If they issue/sell additional authorized shares they get additional cash. If they rebuy then reissue stock then they can get cash. From an accounting stand point it's not really "making money" when selling your own shares.

[Diff-chan]

It's raising equity. Raising capital, whether it is debt or equity, doesn't change the value of a firm (theoretically). In exchange they give up, obviously, a share of the company and some control rights.

[Bojack]

some control rights.

Not always tho'. Non voting stock does exist.

[Fe 26]

This is generally correct. Who ever holds the share gets the cash. Companies only usually have their own shares at IPO, if they hold stock on reserve, or treasury shares. If they issue/sell additional authorized shares they get additional cash.

right.

I guess what I was getting at was that the bulk of shares that individuals buy for their own investments are not IPOs. (though I might be wrong. I can't find any data saying one way or another the % IPOs make up of the average investment port. I just can't think of a rational reason for someone to only buy IPOs)

If they rebuy then reissue stock then they can get cash. From an accounting stand point it's not really "making money" when selling your own shares.

Well yes, because you can't pay bills, taxes, wages and the like with equity because equity is rarely made up entirely of cash.

[Bojack]

Well yes, because you can't pay bills, taxes, wages and the like with equity because equity is rarely made up entirely of cash.

Well, equity is residual of what's left over after your assets pay your bills. Any firm is their assets = liability + equity. A firm could issue new stock to pay expenses but a firm that does something like that is generally in some significant trouble. Besides, issuing stock doesn't really affect your equity, you authorize your shares and then sell them. Firms set a par value on their shares (completely arbitrary number btw) and then the difference is booked to additional paid in capital. To illustrate,

Company authorizes then sells 10 shares of common stock with a par of 5 bucks/share. They sell the shares for 10 bucks eaches.

......Cash 100
...............Common Stock 50
...............Additional paid in capital 50

Very simplistic but shows what happens when shares are sold. The cash increases by 100 on the asset side, but the common stock and apic entry happens on the equity side. The company just converts equity into cash by selling itself off. This all being said I more or less meant that selling shares isn't a revenue generating activity especially from an accounting stand point. The company makes money but it doesn't "make money".

[Fe 26]

Ok, we're getting a little off topic.

My original point was that many rich people have a large sum of their money put into things that don't create jobs, like buying stock on the secondary market, were the sale of the stock didn't actually generate anything for the company in question.

SSJN brought up IPOs as some form of counter point.

Since you have a fairly good grasp of this, would you agree or disagree that a good bit of what people currently invest in doesn't actually create jobs?

And I'm completely ok with being wrong about my original assumption. I'd love to hear that people who make a good bit of their money off of investments are actually helping other people get work. I don't want to be right about this.

[Bojack]

Ok, we're getting a little off topic.

My original point was that many rich people have a large sum of their money put into things that don't create jobs, like buying stock on the secondary market, were the sale of the stock didn't actually generate anything for the company in question.

SSJN brought up IPOs as some form of counter point.

Since you have a fairly good grasp of this, would you agree or disagree that a good bit of what people currently invest in doesn't actually create jobs?

And I'm completely ok with being wrong about my original assumption. I'd love to hear that people who make a good bit of their money off of investments are actually helping other people get work. I don't want to be right about this.

Yeah, rich people passing money around doesn't always make jobs especially post IPO. I mean, if I have a million bucks, I can buy a million bucks in Apple stock, sit on it for a while and sell it for say 2 million bucks, I've profited but it's not like I built a factory or invented a handy iPhone app or something that adds value to society. I just took advantage of the concept of the stock market, which on my more cynical days I feel is just an ingenious device to help the rich acquire more wealth.

I feel the stock market should be HEAVILY regulated and only open to institutional or other approved/accredited people because of the problems it causes. If a company wants to whore itself out for some quick cash they can do that. Some one shouldn't be able to buy on margin or issue stock options to CEO's or a variety of other bullshit concepts that have arisen from the market.