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The Stock Market Illusion

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posted on Dec, 19 2011 @ 12:08 PM
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What is the purpous of the stock market?



Currently, when you invest you are placing a bet on the success of a company. If the company you bet on does well you win, if the company you bet on doesn't do well you lose.

On one hand you have a companies stock market value. This is the value based around how many people have placed a bet on how well the company will do. On the other hand you have the actual value of the company. It is the fluctuations of a companies actual value that make the betting system work. If a company initally projected to be good suddenly has an unforseen issue, say like a production line breaking down, it drastically changes the actual value of the company. It is because of the bet placed on the now unsuccessful company that causes the investor to loose their bet. This is how the system should work.

The problem is the stock market is creating an illusion of what a company is worth based on opinion. A companies actual value could sometimes be far greater. An issue can arise if the mindset of the investors is that the company would not be successful, and the simple act of selling off their shares can sometimes be all it takes to drive a potentially successful company under.

"But that's the way the system was built, how is that an issue?" You might ask.

It is an issue because it is this very structure our entire world economy is built upon. We've seen the effects of people loosing their faith in the system recently with the last market crash.
A market crash occurs when the majority of investors feel the market is too volitile to continue investing, so they pull their money out. As more and more investors pull out their money, the further down the drain the market goes until, as we saw in the last few years, the system completely crashes. It then takes years for investors to regain faith in the system, which is the state of depression we find the world in today.

The idea of the stockmarket is so deeply rooted in modern society, that few even contemplate an existance with out. Some who support the system will say it is a neccessary entity for investors to feel comfortable to invest in certain companies because it forces the publicly traded companies to have transparency on company profits and new endevors. This allegidly makes it easier for investors to predict how the company might do in the current market. This however is a farce. If an investor invests in a privately traded company, the investor still has every right to ask that the same tranparency be given, to be then negotiated in a written contract before providing any form of funding.

The only other reason we are given for its purpose is that "it is the most important source for companies to raise money" because is allows publically traded companies to raise capital very quickly by selling it's stock shares. This is the very root of the problem. Put simply, the stock market is important because it allows investors and companies to make more profit quicker.

In other words, its all about the money! This is why the stockmarket is an illusion. It is creating wealth for the investors and companies based purely off speculation. Very seldom is it actually based off business success. How many small businesses have closed in the last few years? How many shopping plazas lay vacant as a brand new wallie world or mcbuger-in-a-box is being built across the street? Its a rigged system, and as soon as too much competition starts showing against big business we will more than likely see it crash all over again. It doesn't hurt the big businesses any, who do you think is pulling out the money to cause the crash to begin with. After the small businesses go under, they swoop in and buy up the competition at pennies on the dollar. We just watched it happened it with most of the banks. Ask anyone in the business how many banks there were before the crash compaired to now. Go even further and look up how many of them were bought up by the very banks that were bailed out! This proves its all an illusion, and nothing but a rigged system.

Is it a neccessary system? Not in the least! Of course we will be told it is because the largest investors controlling the biggest cash flow stem to loose the most if its done away with.

As was stated before however, its all an illusion. All it would take to bring the system back into the average joe's favor is one of two things.

1. Don't publically trade your company. Sure it will be a little more difficult to start, but private investors are still out there. The more businesses to go this route, the easier it will get.

2. At the very least, buy stocks only in the companies you truely support. Sure there may be more profit initially by investing in the latest media craze, but that only furthers our dependency on the illusion. Plus, would you not sleep better knowing your money is with a business you support, rather than some unknown fly by night that just happened to have cheap shares?

In the end, it is us that continue to support the illusion. It is by our own choice that we allow such a rigged system to continue to exist. We have very realistic means of breaking our dependency on this system, so when the next market crash occurs we will have only ourselves to blame.




posted on Dec, 19 2011 @ 01:00 PM
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I don't think it's an illusion. If you look at certain corporations like say IBM (183.68/share), they've been around for a long time and not because certain investors have a high opinion of them, but because they produce products that make them money. Exxon- Mobil (79.97/share) makes all kinds of money (oil is up today), I don't think it's because investors have a high opinion of them. If you look at Bank of America (5.02/share), their stock price is really low, yet profit wise they make billions. So even though investors have a low opinion of them, they still make a lot of money. That's not an illusion. Their value isn't based solely upon the opinions of others.



posted on Dec, 19 2011 @ 01:01 PM
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There is a good side to the stock market... it allows average Joes like you and me to own multi-national corporations. (Well, a tiny portion of them anyhow.)

As with almost any system, the problem is not the system itself, but the corruption which humans add to the equation.

At its core, the stock market is a fabulous tool. Before its existence, corporate ownership was limited to a very select group of extremely wealthy individuals. The possibility of splitting up a corporations among thousands of shareholders is essentially democracy in the financial realm.

Of course, when we look at what we actually got when we were sold the idea of "democracy", we shouldn't be surprised that the small group of select individuals have managed to rig the system to ensure they conserve their favored positions of wealth and power.

the Billmeister
edit on 19-12-2011 by Billmeister because: wording



posted on Dec, 19 2011 @ 01:58 PM
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Originally posted by alonzo730
I don't think it's an illusion. If you look at certain corporations like say IBM (183.68/share), they've been around for a long time and not because certain investors have a high opinion of them, but because they produce products that make them money. Exxon- Mobil (79.97/share) makes all kinds of money (oil is up today), I don't think it's because investors have a high opinion of them. If you look at Bank of America (5.02/share), their stock price is really low, yet profit wise they make billions. So even though investors have a low opinion of them, they still make a lot of money. That's not an illusion. Their value isn't based solely upon the opinions of others.


IBM is one thing, they're in a unique market that much of their research can only be done by them. The illusion is the actual value of a corporation and the market value are two vastly different things. Exxon and Bank of America are great examples of how there's an issue...both of these coporations have cornered their markets to the point that competition is nearly impossible. They both fall into what has come to be known as the "too big to fail" group. Their market shares are so vast in their sectors that it almost creates a makeshift monopoly that's completely legal. The market shares of their rivals in their sectors have practically no chance of competition. I'm not saying there's anything wrong with public shares, but its a real issue when people are not buying shares of the companies they support at the cost of buying shares from a company the may very well not like but seek the bigger profit.



posted on Dec, 19 2011 @ 02:38 PM
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reply to post by Billmeister
 


The stock market absolutely is a fabulous tool...but that's exactly it, a tool. It should not be the fundamental core of our economy. In this day and age we should be beyond having to worry about a market collapse. If the market was used properly there would probably be no issue...but it only takes a small handfull of individuals to drastically manipulate it, and that's the scary thing.

In its initial application I'm sure it was intended so everyone could invest in the companies they support, but now that profit has become its only purpose the stock market has become so grossly distorted...




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