I've been thinking about the share market

**Jeremy** · 1st September 2011, 14:49

Originally Posted by Clockwork

Some times I look at what I'm paid and in all honesty I think to myself. "I don't see how I can be worth that!"

Then I learn what they are paying for other services and people and suddenly I don't feel so guilty. Truly, value is in the eye of the beholder. (Or perhaps in the case of the share market, the non-owner)

But I still don't see how any of this answers the question about why we, as a society (or economic units) should be encouraged to trade shares. Why that is deemed to be generating wealth and a worthy use of our money.

Because the NZ markets suffer from a massive lack of liquidity. Consider https://nzx.com/markets/NZAX/securities/BFW , it's had a grand total of one trade today, there's a very good chance that the value of those shares does not reflect the true value of the company. Or even https://nzx.com/markets/NZSX/securities/AIA , that's had 158 trades. If you can't find someone to sell your shares to then you can't invest in something else, say a new IPO, which is a major issue.

Also those IPO issues often struggle to come up with enough money to finance them, thus less companies go public. Restricting them from access to greater funds, and not allowing them to make that jump to becoming large companies.

**Clockwork** · 1st September 2011, 14:52

I think, when all is said and done, that the actual investing is done by the companies and I suspect in most cases it's done with money borrowed off the bank. The rest of us are just looking for places to park our money where hopefully it will not be eaten away by inflation.

**Jeremy** · 1st September 2011, 15:18

Originally Posted by Clockwork

I think, when all is said and done, that the actual investing is done by the companies and I suspect in most cases it's done with money borrowed off the bank. The rest of us are just looking for places to park our money where hopefully it will not be eaten away by inflation.

Those same banks get most of their money from the sharemarket too though. Like at the moment ANZ is doing CPS3 to raise another 750 million.

**avgas** · 1st September 2011, 15:42

Originally Posted by Jeremy

Those same banks get most of their money from the sharemarket too though. Like at the moment ANZ is doing CPS3 to raise another 750 million.

I am sure some of that will come from OnePath

...I mean kiwisaver

**p.dath** · 1st September 2011, 16:28

Originally Posted by Clockwork

Sorry, p. I don't think you've been comprehending my point. What you've just described is gambling not investing. Its even the analogy you used!

Gambling is investing. Just different ways to describe the risk.

**steve_t** · 1st September 2011, 16:47

Originally Posted by avgas

I am sure some of that will come from OnePath

...I mean kiwisaver

LOL. Don't get us started on Kiwisaver....

**Clockwork** · 1st September 2011, 16:52

Originally Posted by p.dath

Gambling is investing. Just different ways to describe the risk.

So say you discover how to manufacture a super-conducter that works at room temprature, you own the patent and all you need is $100,000 to buy the equipment needed to make the stuff and market it. Would you call that kind of investment a gamble?

**avgas** · 1st September 2011, 16:58

Originally Posted by steve_t

LOL. Don't get us started on Kiwisaver....

Kiwisaver.
NZSuper.
Stockmarket.
Its all horribly inbred.

**avgas** · 1st September 2011, 17:02

Originally Posted by Clockwork

So say you discover how to manufacture a super-conducter that works at room temprature, you own the patent and all you need is $100,000 to buy the equipment needed to make the stuff and market it. Would you call that kind of investment a gamble?

Yep.
But seeing as that company is in NZ is a gamble close to home.

Risk does not disappear between investments. Only gets smaller. The gamble still exists.
i.e. Apple had some of the best ideas way back in 1996-7 (and earlier). But they were considered dangerous "gambles". Soon as the gamblers (Gates/Jobs) turned up and put their foot in the door things looked green for Apple.

**Winston001** · 1st September 2011, 19:41

Originally Posted by Clockwork

So say you discover how to manufacture a super-conducter that works at room temprature, you own the patent and all you need is $100,000 to buy the equipment needed to make the stuff and market it. Would you call that kind of investment a gamble?

Yep!

1. You are running a scam and my investment disappears, or

2. The superconductor is caused by a local anomaly in the Earth's magnetic field and only works where you live, or

3. Chinese/Indian/Brazilian/Russian scientists have copied it and dispute your patent...etc etc

Of course it is a gamble, but for that sort of technology with a patent, it would fall in the lower risk category. So for what its worth I'd regard it as an investment.

Want an exciting opportunity?? http://www.indranet.co.nz/ Enjoy.

**steve_t** · 1st September 2011, 19:50

Originally Posted by Clockwork

So say you discover how to manufacture a super-conducter that works at room temprature, you own the patent and all you need is $100,000 to buy the equipment needed to make the stuff and market it. Would you call that kind of investment a gamble?

Definitely yes

**Winston001** · 1st September 2011, 20:00

Originally Posted by Clockwork

That's entirely my point. There is a difference, its just does not seem to be not recognized in our language. If only because we seem to be unable agree on words that that differentiate the two.

Or do you really think there is no difference between spending $100,000. to make something that is (hopefully) worth more than that to someone else, in the hope that from the profits of sale you can make another and another etc... Or going out and putting your $100,000 on red or black, odd or even.

I see your point: you believe that having a sharemarket in which thousands of shares are "traded" (bought and sold) is of no benefit to society. Nothing is made or added value. The only people who benefit are brokers and the winners on any particular trade - which adds nothing to the community.

By contrast, a new manufacturer who sells shares in his factory helps everyone: employees, builders, machinery makers, electricians, income tax, GST, plus profits each year to distribute to the investors.

OK. I'm with you on this - investment, not just buying and selling. So is the government, economists, bankers, unions, pretty much everybody. Everyone says each of us should be investing some of our savings in new businesses.

**Clockwork** · 2nd September 2011, 09:04

Originally Posted by Winston001

....
OK. I'm with you on this - investment, not just buying and selling. So is the government, economists, bankers, unions, pretty much everybody. Everyone says each of us should be investing some of our savings in new businesses.

Exacerlly!.. 'cept what passes for investment appears to be simply the trading of shares. I just think we need to be more specific somehow.

Oh.... to the rest... pointing out all the things that could go wrong, really doesn't make the investment a gamble IMO, no more than getting out of bed in the mooring is gambling with my life.

**avgas** · 2nd September 2011, 09:24

Originally Posted by Clockwork

Exacerlly!.. 'cept what passes for investment appears to be simply the trading of shares. I just think we need to be more specific somehow.

Oh.... to the rest... pointing out all the things that could go wrong, really doesn't make the investment a gamble IMO, no more than getting out of bed in the mooring is gambling with my life.

The term is "going long", meaning your investing on the fact that things are going to improve over the long term and short term issues will not fluctuate your investment.

Most term deposits and kiwisaver schemes invest this way. It offers low returns but does promote the growth of the firm.

Going short basically breaks down to your going to trade them quick, and possibly even borrow do so - hedging a bet the market will change rapidly. This is the negative and highly publicized element of the stock market. But think of these guys as the "squids" of the stock market. Some get rich and famous, many become pavement meat.

The govt is trying to promote people going long. Because this means people are putting their money where their mouth is in growing NZ business. Where as just leaving your money in a bank basically means giving money to some other country (exception is Kiwibank).

There was an article many years ago talking about Germany's market. And how if it wasn't invested initially by German people, it would not have attracted overseas investment. Its now one of the most stable markets in the world - but never offered very high returns. Perhaps that is what the NZ govt is trying to promote in NZ? Currently the NZ market is just a really good place to hide money.........but if more kiwi's invested in it that could change.