Forum Archive Index - October 2001

[David Elsmore-Cary <dcary@southnet.co.nz>]

Bolloks!

On Thu, Oct 11, 2001 at 02:27:59PM +0800, Viewpoint . wrote:
> An investment in a company by way of share ownership is no more than 
> speculation on the future performance of that company, in a game played 
> against other speculators.
>

What has the speculative activities of its shareholders have to do with the
future performance of the company. In the long run it is worth the net 
present value of future cash flows. Tech stocks??
 
> Because very little, if any, of this invested cash goes directly to the 
> company any investment in the share market is essentially no different from 
> picking horse 3 to win race 4 (or whatever form of gambling tickles your 
> fancy)

The perception of the punters has no effect on the result of a horse race but it
does have a huge effect on share prices. Dont you read the paper or this list.

> 
> The difference being you read share market form with P/E ratios, yields, 
> growth rates and all those sort of things and your sharebroker is no 
> different from your local bookie or the TAB.

Agreed. He passes on information, lies, rumours, perception. That is what a 
market is about.
> 
> I said above that very little of this invested cash goes directly to the 
> company involved.  Except for capital raisings through the likes of public 
> issues and the occasional rights issues this is true. Over the past few 
> years, with many share buy backs, there probably has been a net flow of 
> equity capital out of the market. This cash has joined the other cash 
> floating around in the market as speculative cash betting on the future 
> fortunes of companies.

Back this up with some figures.
> 
> As little of the invested cash actually goes to the company any emotional 
> attachment to the company is based on how they are going to perform in 
> future (just like hoping that horse 3 in race 4 will win) and not on a "I 
> own a part of that company" basis.

Emotional attachment to what? emotion dosent enter into the equation.
> 
> Only those investors who have made an actual investment in the equity 
> capital of a company have a right (real or emotional) to say they own part 
> of a business.

Thats the shareholders, speculative or otherwise. Use your sense.
> 
> 
> That added emotional attachment (of real ownership and not just a 
> speculative punt on the future) probably explains, as has been reported in 
> the press, what sharebrokers call the 'stupid' behaviour of the small 
> investor in the recent large buy up of Air New Zealand shares.

> Or maybe it is a set of new punters speculating on the future fortunes of 
> Air New Zealand - just like betting on horse 3 in race 4.
>
What are you saying? 


----------------------------------------------------------------------------
To remove yourself from this list, please use the form at
http://www.sharechat.co.nz/chat/forum/