Are Stock Markets biggest ponzis?

Discussion in 'Wall St. News' started by talknet, Jan 6, 2009.

  1. talknet


    As per above statement, Stock Markets and Mutual funds are "Biggest Ponzis" because stocks & Mutual funds also display Unrealized profits and unrealized losses.,8599,1869196,00.html
  2. No, stock markets are not a Ponzi scheme. But the guy who wrote that piece is too dumb to know the difference between a Ponzi scheme and a market. I can't believe somebody on "elite" trader would even excerpt such drivel and post it.
  3. imagine can buy 1 share of softie and have $183 billion in unrealized gains....the holy grail..I found it..they'll be sending me money hand over fist :D
  4. talknet


    Example-: "Ambani Brothers (Mukesh & Anil)" were collectively valued at $91 billion by Forbes some 4 months back. One of their companies "Reliance Power" received $200 Billion IPO subscription where the IPO was for $2 Billion only (not sure). Later on the stock market crashed, if not then investors (hedge funds & mutual funds) would have invested $200 billion in a "worthless company" which was original valued at $2 billion through the stock market . That is 100 times over-valued or unrealized gains.

    Ambani's are the owner's of most over-valued, over-hyped, over-invested & basically worthless "Reliance Industries". No Company or Investment Firm in the world will ever pay the current market capitalization for acquisition of Reliance because the profits are not worth it. There is no future.

    Basically there is "blind investments or unrealized gains" into Indian companies from local and international investors (hedge funds & mutual funds). There is no sales future.

    That's the reason I always write "China & India will crash to rock bottom now.
  5. Pekelo


    Except when they are. The analogy is correct because both Ponzis and stock markets are based on the "principle of bigger fool", that in the future you will be able to sell your stock to an even bigger fool at a higher price. The only difference is that with stocks most of the time there is a real value behind the transaction. (not always, see dotcom start ups)

    Since prices can not go up forever, with basicly every stock there will be a time when somebody is going to be holding the bag and lose...

    P.S.: Tell me that buying shares in wasn't a Ponzi! :)

    History was a short-lived online business that sold pet accessories and supplies direct to consumers over the World Wide Web. It launched in August 1998 and went from an IPO on a major stock exchange (the Nasdaq) to liquidation in 9 months. Other similar business-to-consumer companies from the same period include Webvan (groceries), and (garden supplies). stock had fallen from over $11 per share in February 2000 to $0.19 the day of its liquidation announcement.

    "A bubble. A bubble relies on suspension of disbelief and an expectation of large profits, but it is not the same as a Ponzi scheme. A bubble involves ever-rising (and unsustainable) prices in an open market (be that shares of a stock, housing prices, the price of tulip bulbs, or anything else). As long as buyers are willing to pay ever-increasing prices, sellers can get out with a profit. And there doesn't need to be a schemer behind a bubble. (In fact, a bubble can arise without any fraud at all - for example, housing prices in a local market that rise sharply but eventually drop sharply because of overbuilding.) Bubbles are often said to be based on "greater fool" theory. Although, according to the Austrian Business Cycle Theory, bubbles are caused by expanding the money supply beyond what genuine capital investment supports, and in this case would qualify as a Ponzi scheme, with expanded credit taking the place of an expanded pool of investors. "
  7. I wouldn't say that the "Stock Market" is a ponzi scheme per sa.
    There are plenty of Fund Managers, Stock Brokers, Investment Banks etc who have treated clients much like they where in a Ponzi Scheme.

    I wouldnt' say the Stock Market is based on "The biggest Fool" theory either.

    However, the public's perception of the "STOCK MARKET" has become much like it was after the Great Depression.
  8. Pekelo


    The stock market is also based ( although indirectly) on ever expanding shareholders/growing number of investors/continuous capital inflow. If the capital inflow to the markets stops, prices start to fall or at least stop going up...

    One exception is stocks that pay dividends, because for the owner of such stocks the price doesn't need to go up to profit from it...

    OK, so far that is an OPINION, do you have an ARGUMENT to back it up?
  9. No, that is what it has become but there is an underlying concept behind it.

    Ideally, you buy company shares and expect actual benefits from your investment, in the form of dividends. Just like when you buy a business, you expect earnings, part of which is reinvested in the company and the rest is positive cashflow to you.

    Nowdays, it's pretty much a Ponzi scheme, since most companies do not or barely pay dividends.
  10. talknet


    The biggest example is "Reliance Power" who received $200 Billion IPO subscription where the IPO was for $2 Billion only (not sure).

    If the stock market had not crashed, then investors (hedge funds & mutual funds) would have invested $200 billion in a "worthless company" which was original valued at $2 billion through the stock market . That would have been 100 times over-valued or unrealized gains.

    Majority of $200 Billion investors were from USA & Europe.
    #10     Jan 6, 2009