I've said this before. The problem is investors. The CEOs are fine. Investment allows a few people (controlling interest shareholders) to control more capital than is represented by their shares and so they use that control in ways that goes against the interest of the other shareholders, the founders, the staff, and their customers.
Companies can purchase other companies' stock and so they can gain a controlling interest easily. Board members can manipulate CEOs to do their bidding and CEOs can be canned at any time. When a company invests in another to the point of controlling interest the effects nest and multiply and can be done limitlessly by any group that is organized.
It is highly leveraged control and highly unleveraged investment.
How to fix it. Make all stock premium giving a dividend of at least 15% of profit so we are no longer giving free money to companies that can then be manipulated. Set a bottom threshold for the percent of ownership that needs to be in a board room. If the room gets full and it gets annoying then someone will have to buy someone else's stock.
It's not regulations. It's amendments to a system the departs from some free-market principles.
Allowing someone who is underleveraged have control in a company is exactly the opposite of the concept of having people who own capital control capital.
Giving money to companies as an "investment" that have no basis financially to be valued and allowing other people to control that essentially donated investment goes against the core principles of investment.
Of course this is facilitated by the central bank. People are willing to buy the worthless when it's fiat that outperforms the dollar.
Compare this to real estate.
You buy a new apartment complex with a 62.85% margin. That is 100,000 in expense and 162,850 revenue. You increase rent by 5% (in a place where that increase is sustainable), and you reduce expenses by 10%. Expense 90,000, revenue 170993.50. Before you had a cash flow of 62,850 and now you have a cash flow of 80,992.50. You made money. But the valuation of the property before and after if you have an average market rate for your industry of 3% the npv originally is 1,895,000.00 and ends up with 2,499,750.00.
So really you made 604,750.00 with your decisions. Now let's say you only had 20% down and the majority of the money was from the bank. You're investment is 379,000.00. That's a 160% ROI.
So that's standard investment. Let's talk about how that differs from stock. (1). You are highly leveraged. This gives you moral authority to make decisions because you are more affected by the outcome than any other party. In the stock example we are talking about giving control to people that may be reversely leveraged.
(2). The valuation and the gains were based on an actual cash flow into the pocket of the investor. No expected increase in cash flow to the stock owner, no increase in stock value! This is how it should work.
Anything else is corporate charity fueled by a devaluing dollar controlled by plutocrats and the well connected. This is not actual investment.
Every dollar given to Facebook for its IPO is a gift with no reciprocation.
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bikergang_accountant ago
I've said this before. The problem is investors. The CEOs are fine. Investment allows a few people (controlling interest shareholders) to control more capital than is represented by their shares and so they use that control in ways that goes against the interest of the other shareholders, the founders, the staff, and their customers.
Companies can purchase other companies' stock and so they can gain a controlling interest easily. Board members can manipulate CEOs to do their bidding and CEOs can be canned at any time. When a company invests in another to the point of controlling interest the effects nest and multiply and can be done limitlessly by any group that is organized.
It is highly leveraged control and highly unleveraged investment.
How to fix it. Make all stock premium giving a dividend of at least 15% of profit so we are no longer giving free money to companies that can then be manipulated. Set a bottom threshold for the percent of ownership that needs to be in a board room. If the room gets full and it gets annoying then someone will have to buy someone else's stock.
We need to end investment as we know it.
psychosomatic ago
Sounds like regulations. Trump says those are bad, and anything else's fake news!
bikergang_accountant ago
It's not regulations. It's amendments to a system the departs from some free-market principles.
Allowing someone who is underleveraged have control in a company is exactly the opposite of the concept of having people who own capital control capital.
Giving money to companies as an "investment" that have no basis financially to be valued and allowing other people to control that essentially donated investment goes against the core principles of investment.
Of course this is facilitated by the central bank. People are willing to buy the worthless when it's fiat that outperforms the dollar.
Compare this to real estate.
You buy a new apartment complex with a 62.85% margin. That is 100,000 in expense and 162,850 revenue. You increase rent by 5% (in a place where that increase is sustainable), and you reduce expenses by 10%. Expense 90,000, revenue 170993.50. Before you had a cash flow of 62,850 and now you have a cash flow of 80,992.50. You made money. But the valuation of the property before and after if you have an average market rate for your industry of 3% the npv originally is 1,895,000.00 and ends up with 2,499,750.00.
So really you made 604,750.00 with your decisions. Now let's say you only had 20% down and the majority of the money was from the bank. You're investment is 379,000.00. That's a 160% ROI.
So that's standard investment. Let's talk about how that differs from stock. (1). You are highly leveraged. This gives you moral authority to make decisions because you are more affected by the outcome than any other party. In the stock example we are talking about giving control to people that may be reversely leveraged.
(2). The valuation and the gains were based on an actual cash flow into the pocket of the investor. No expected increase in cash flow to the stock owner, no increase in stock value! This is how it should work.
Anything else is corporate charity fueled by a devaluing dollar controlled by plutocrats and the well connected. This is not actual investment.
Every dollar given to Facebook for its IPO is a gift with no reciprocation.
kinneys ago
Thank you for the breakdown.
Really eye opening.