I've been thinking about the share market

[avgas]

This seems to have turned into a discussion about semantics

It has to be unfortunately. Clockwork has created a thread STATING that the stockmarket is the devil. But has not actually looked into what stocks are, what they do etc. Without simple terms and explanations as to what things are, what terms are used, what they mean etc...
How will Clockwork ever think that the market is anything but people betting on companies?

Its kinda like saying. "Why should I buy a honda? my mate has a honda and something fell off, dunno what it did but therefore by default all Honda's a horribly assembled and it makes the worst motorcycles in the world".

People would ask questions like What fell off? What makes you think they are worse than others? Do you know how to ride a motorbike? Do you know anything about bikes? Do you know anything about Honda?.......

[Clockwork]

Its 's interesting what people are taking from my comments.

I guess to clarify, I don't think the stock market is the devil, I just think "it ain't all that!" That there is a difference between "investing in the stock market", which I accept does serve a purpose and "investing in business and the NZ economy" and that that difference (for the sake of all us "Ma & Pa" investors) really needs to be spelled out clearly and repeatedly else we stand to be fucked over royally.

[steve_t]

Its 's interesting what people are taking from my comments.

I guess to clarify, I don't think the stock market is the devil, I just think "it ain't all that!" That there is a difference between "investing in the stock market", which I accept does serve a purpose and "investing in business and the NZ economy" and that that difference (for the sake of all us "Ma & Pa" investors) really needs to be spelled out clearly and repeatedly else we stand to be fucked over royally.

I might need you to clarify this further. The difference between investing in the share market (which for the NZX is shares in publically traded NZ companies/businesses) and investing in NZ business is...

[Clockwork]

OK, I'll try to explain my point one more time.

Buying or selling a company's shares will make no differnece to the business of the company, it wont expand its markets or increase its productivity or as far as I can tell, make any practical difference to its bottom line. The share buyer/seller may make make a captial gain or loss on the deal but the business of the company will be unaffected.

Investment in a company or more accurately, by a company, would entail a capital outlay that would reasonably be expected to yield (in time) an improved return for that company by way of reduced costs/overheads increased producutivity or improved market opportunities.

I've simply been reflecting that IMO only one of these scenarios is beneficial to the greater economy. That share trading (for those of us amatures on the fringes at least) mostly seems to be done for the purposes of capital gain. That existing market players will welcome/encourage such "novice" traders simply because it increases the supply of money thereby increasing their existing shareholdings without actually adding any value to the businesses.

I'm concerned that we as a nation are being encouraged to participate without fully understanding these differences.

I'm futher concerned that we reinforce this state by taxing a company's productive returns while not taxing these capital gains. This, to my mind is entirely arse about face and ultimately counter productive to the economy in general. I would have thought that as a nation we should be better off changing our tax base to encourage long term productive growth rather than rewarding short term share speculation.

[steve_t]

OK, I'll try to explain my point one more time.

Buying or selling a company's shares will make no differnece to the business of the company, it wont expand its markets or increase its productivity or as far as I can tell, make any practical difference to its bottom line. The share buyer/seller may make make a captial gain or loss on the deal but the business of the company will be unaffected.

Investment in a company or more accurately, by a company, would entail a capital outlay that would reasonably be expected to yield (in time) an improved return for that company by way of reduced costs/overheads increased producutivity or improved market opportunities.

I've simply been reflecting that IMO only one of these scenarios is beneficial to the greater economy. That share trading (for those of us amatures on the fringes at least) mostly seems to be done for the purposes of capital gain. That existing market players will welcome/encourage such "novice" traders simply because it increases the supply of money thereby increasing their existing shareholdings without actually adding any value to the businesses.

I'm concerned that we as a nation are being encouraged to participate without fully understanding these differences.

I'm futher concerned that we reinforce this state by taxing a company's productive returns while not taxing these capital gains. This, to my mind is entirely arse about face and ultimately counter productive to the economy in general. I would have thought that as a nation we should be better off changing our tax base to encourage long term productive growth rather than rewarding short term share speculation.

But there are a lot of average joe investors like me who don't trade frequently but rather buy shares and look for dividends as well as hope for capital growth over many many years.

The initial "investment" in the company comes from it's IPO (or maybe an issue of bonds), but after that, there has to be share trading. And of course the money from investors is used to grow the company otherwise why would they sell off part of their company? I get the feeling that you think the money people invest in companies by buying their shares does nothing for these companies or the economy...

[Winston001]

I'm concerned that we as a nation are being encouraged to participate without fully understanding these differences.

We aren't. I do not know of any serious commentator, politician, or journalist who tells the public they should buy shares to trade. Buy and put in the bottom drawer - yes. I think the general public understand that but they do not trust shares and who can blame them. Three maybe four crashes in the past 25 years.

Buying a bluechip share is no different to buying a commercial building. Or a rental house.

[Smifffy]

Couldn't agree more.

We aren't. I do not know of any serious commentator, politician, or journalist who tells the public they should buy shares to trade. Buy and put in the bottom drawer - yes. I think the general public understand that but they do not trust shares and who can blame them. Three maybe four crashes in the past 25 years.

Buying a bluechip share is no different to buying a commercial building. Or a rental house.

[joan of arc]

My simplistic take on the government's desire to see NZers save money by putting it in the bank or investing in the stock market is to move us away from investing in the property market. I don't think that they necessarily see the Stock Market as being productive but as a viable option to owning rental property because the potential to make money is comparable whereas putting funds in the bank is perceived to be a poor means of turning a profit. The mortgages that we procure to obtain a second, third or 10th property sees huge sums of money disappear off-shore to which ever lender the bank has borrowed money from. If we save then the interest comes to us and therefore remains in the country. Buy shares keeps money in the country.

From observing what has happened over the last four years, my perception is that saving too much is also not so good for the economy as so many business hit the wall if there are insufficient people spending money.

I don't know what the ideal is, but seems to be kinda tricky finding it

[avgas]

Buying a bluechip share is no different to buying a commercial building. Or a rental house.

Actually its also a little bit secure....imagine walking into a bank and saying

"Hi I am joe blow, you don't know me, I have $20,000 but I would like a loan of an additional $380,000 so I can buy $400,000 of stocks on the stock market".

It will be the first time you will see a bank manager crack up laughing. He might laugh so hard he wets himself.

But I have been harrased on a annual basis by banks asking me if I want XXX dollar mortgage approval. Some of the these banks don't know me from a bar of soap.

[jonbuoy]

OK, I'll try to explain my point one more time.

Buying or selling a company's shares will make no differnece to the business of the company, it wont expand its markets or increase its productivity or as far as I can tell, make any practical difference to its bottom line. The share buyer/seller may make make a captial gain or loss on the deal but the business of the company will be unaffected.

Investment in a company or more accurately, by a company, would entail a capital outlay that would reasonably be expected to yield (in time) an improved return for that company by way of reduced costs/overheads increased producutivity or improved market opportunities.

I've simply been reflecting that IMO only one of these scenarios is beneficial to the greater economy. That share trading (for those of us amatures on the fringes at least) mostly seems to be done for the purposes of capital gain. That existing market players will welcome/encourage such "novice" traders simply because it increases the supply of money thereby increasing their existing shareholdings without actually adding any value to the businesses.

I'm concerned that we as a nation are being encouraged to participate without fully understanding these differences.

I'm futher concerned that we reinforce this state by taxing a company's productive returns while not taxing these capital gains. This, to my mind is entirely arse about face and ultimately counter productive to the economy in general. I would have thought that as a nation we should be better off changing our tax base to encourage long term productive growth rather than rewarding short term share speculation.

The Company Directors/owners and possibly employees probably own a fair chunk of those shares themselves so its in the companies interest for high share values.

[p.dath]

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?

So if I discovered it, and I new it worked, then I would be looking for equity investors.


However if you told me you had invented it, I'd probably think it was a fraud. Neither an investment nor a gamble.

[Usarka]

OK, I'll try to explain my point one more time.

Buying or selling a company's shares will make no differnece to the business of the company, it wont expand its markets or increase its productivity or as far as I can tell, make any practical difference to its bottom line.

Incorrect. As a shareholder you often get a vote on important matters so you do have some say on the direction of the company.

[avgas]

I still stand by what I said before Clockwork. Your getting ripped off, and your CEO deserves to lose his head if he doesn't notify the shareholders. Likewise your board.
Don't confuse poor investment with poor governance. Note that in the papers recently directors have been sentenced to prison time.

Without shareholders having their say, your company can do what it wants. Its illegal. People look poorly on this since 2008. Now people go to jail over misleading shareholders.
I suggest you raise this with your CEO and tell them you want a pay rise (to keep quiet) and you want it fixed.

The Company Directors/owners and possibly employees probably own a fair chunk of those shares themselves so its in the companies interest for high share values.

If that is the case talk to the other shareholders. Its lack of notification like that that gets CEO's fired. I have seen it happen many times before. Soon as the shareholders get smart the pigs get sent to slaughter.

I wish this were true but I'm less than convinced. I understand that some shares carry no voting rights whatsoever. This must be true 'cus I have shares in my employer and I aint never been invited to an AGM or asked to vote on any matter yet!

[Clockwork]

As I understand it, not all shares are voting shares.... but this doesn't really matter to me anyway because the reality is that the small share holder will never be able to compete the institutional investors and for that reason I think Usarka's point is a bit of a stretch.

So if I discovered it, and I new it worked, then I would be looking for equity investors.

Yes, yes yes.Its a silly proposition but I was getting frustrated by the arguments that all investments are gamble. I accept that there is a risk element in almost everything we do in life. If by that argument everything we do in life is a gamble then yes, investing is gambling too. But if I invest in an action because I can see that the action being taken, should in the normal course of events return a positive outcome, I don't consider that to be a gamble, if however, I risk money in the expectation of a return without being able to influence the outcome one way or another. That would be a gamble and that is how I view share trading.

Please don't think that I'm trying to tell the share traders out there that they shouldn't be doing this. This was just the end of a thought process, a philosophical exercise that made me realise that if and when I decide to enter the market I would prefer to see the money "invested" rather than just buy some shares. I put it out there as a discussion point to see if others agreed or disagreed.

[Winston001]

That would be a gamble and that is how I view share trading.

Please don't think that I'm trying to tell the share traders out there that they shouldn't be doing this. This was just the end of a thought process, a philosophical exercise that made me realise that if and when I decide to enter the market I would prefer to see the money "invested" rather than just buy some shares.

With respect, you are still confused. "Trading" is done by a small minority of people. The number of shares traded is minor. Most shares are held for at least a year and often many years.

Buying shares in an existing company is an investment just like a term deposit. Slightly higher risk but far less risky than investing in a new business which has yet to prove itself. You can do that certainly, just do so with your eyes open.