Why isnt the stock market a SCAM?

[LegendKiller]

Originally posted by: biggerRIG
I think he was saying that the whole market is way overvalued.

In that case, even if it is overvalued now, then the entire market will *STILL* return inflation + equity premium, or 7-10% for probably the next 100 years.

Now, one thing to note about houses. According to most information, they have only appreciated 70% above inflation over the past 115 years, including a 50% jump in the last 10 years. To recap, houses have increased 20% for 105 years and 50% in 10, completely throwing off any good analysis. Even with this massive bubble, houses only returned .26% YOY for 115 years, adjusted for inflation.

Compare that to the stock market, returning ~5% YOY adjusted for inflation.

 

[JS80]

Originally posted by: LegendKiller
First off, price isn't set only by demand, it is set based upon the expectation of future cashflows that will be paid to the investor. Therefore, whatever future cashflows that are retained (retained earnings), you can either A. Expect them to be released in the future or B. Expect them to generate future earnings.

Now, retained earnings increase the overall book value of a stock, leading to additional stock price appreciation. Furthermore, the market sets price points, based upon reasonable assumptions of each individual investor building their own models.

how do the models work? There are a few different ones, including the Discounted Cash Flows, Discounted Abnormal Earnings, Discounted Value-Added...etc. All of them build in growth assumptions and then discount those back.

What discount do they use? They use a reasonable assumption of risk and return. This is usually set by a model, such as CAPM. CAPM assumes that all goods are based upon three components, a base "Risk-Free" rate, such as a government bond, the Beta or a risk measurement compared to the overall asset basket, and the equity or risk premium.

The overall return basket is usually based off of a broad index, such as the S&P 500, but can also include international equity. The returns of the company are then regressed against those of the index and a Beta is found.

The equation is this: RfR * B (Market - RfR)

Say for example you have a very risky company, it's price movements are 1.5x (beta) the overall market, assume that RfR is 3% and the market returns 10%.

That means that 3% * 1.5 (7%), the stock should return at least 13.5%.

Now, the equity risk premium is a huge debate. As many mentioned, there is ample evidence to suggest that the Equity Risk Premium (Market - RfR) has now compressed, where it used to be ~5%, it is now ~3% and could even decline further.


Pricing aside, your assumption that prices are based upon supply and demand only also assumes you are looking at *INDIVIDUAL* issues. Of course, not all issues with be affected by a price/demand difference, since there is a finite amount of money chasing an almost infinite amount of issues, some have to go up and others must go down. Therefore, the overall equation must be balanced.

Take for example Intel and AMD. Previously AMD was priced very high while Intel was priced low. In relation to the earnings they generate (and assume to disburse later) or the P/E ratio, you were paying in excess of 32x earnings (it will take you 32 earnings periods to recover the cost of that stock) to purchase AMD while you were only paying 20x or less for Intel (I bougt in at 14 while shorting AMD at 30). That means that AMD was irrationally high compared to Intel.

Furthermore, Intel is a *BETTER* company, now and in the past. There are two things that could have driven the appreciation of AMD, improved analyst forecasts, or irrational market expectation and supply/demand irrationality. Now that AMD has proven it's numbers weren't going to be sky-high forever *AND* analyst expectations haven't really changed *WHILE* price has come down and P/E has lowered, you see that AMD was really overpriced.

Furthermore, Intel was underpriced due to people flocking to AMD and throwing the Supply/Demand out of whack. Therefore, if you would have *BOTH* issues, you would be evening the situation out.

So, one could only conclude that you are mixing temporal periods *AND* indivudual issues. You cannot say "Well, over 100 years the market has returned 10% but it only depends on supply/demand". Well, s/d is only a short-term situation while you are quoting a long-term number. Furthermore, S/D is largely a micro level where you are speaking of a macro number.

Essentially, you have gotten completely confused. Your confusion has lead to your questioning of a system which supports trillions of dollars per day and do not only affect the rich, but everybody in between.

It isn't a scam, it isn't a fraud or a way to cheat. It is a medium by which growth is achieved by parceling out ownership to raise capital. Since not everybody will always want to own that piece it has to be fungable. That piece represents not only current earnings through dividends, but also, assuming no further piece issuances, a larger chunk of an ever-expanding pie.

LOL why did you even bother? These guys don't understand managerial finance.

Yes, equity isn't a scam, but during bubble times it works in a very similar fashion to a ponzi scheme.

Which leads to derivative trading, specifically oil. Oil futures market is what's driving price up. That is truly a ponzi scheme because 1) 99% of traders are not in the oil/oil related industry and are not using futures to hedge and 2) 99% of traders have no intention or capability of delivering or receiving the underlying commodity.

 

[JS80]

Originally posted by: LegendKiller

Originally posted by: biggerRIG
So lets say i buy 1000 shares of Google right now and get ownership of 1/100000th of the company. What benefit will i get out of that purchase other than the hope that the stock price increases?

It's not a hope. An informed and logical investor can see that individual issues could be a bad buy, or a good one. Personally, I wouldn't buy GOOG, it isn't worth it.

Furthermore, you are *STILL* mixing you temporal and micro/macro levels. You say that the market as a whole returns ~10%, yet pick on individual issues. if the market were a scam, then why pick on one company? Just buy the market?

Yes, for GOOG you get the potential of an increasing stock price *AND* the future cashflows of the company once it starts releasing cash in dividends (once there are no projects of positive NPV).

Speculating on single issues is foolish for anybody but a trained and disciplined investor, one who can spot stocks that are out of their supply/demand worth.


Ohh, and I just found out.


WOOOOOOOOOOOOOOOOOOOOOOOOOOOOOOOOOOOOOOOOOOOOOOOOOOOOOOOOOOOOOOOOOOOOOOOOOOOOOOOOOOOOOOOOOOOOOOOOOOOOOOOOOOOOOOOOOO


I just passed CFA Level 3, 3 exams, 3 tries, 3 passes!

wow congrats. nerd.

 

[Miramonti]

Originally posted by: ElFenix
arguably, if a company doesn't pay as much in dividends but still has that income, then their capital is increasing and the stock price should increase accordingly anyway.

The stock price will not increase unless someone is willing to pay more for it than the last traded price.

 

[JS80]

Originally posted by: biggerRIG
I think he was saying that the whole market is way overvalued because there is way too much DEMAND for securities. Everyone is brought up with the mindset that "the stock market is the best way to make money" and "10% over the long term."

And the market is liquid enough that there will be short players to bring the stock price down.

 

[LegendKiller]

Originally posted by: jjsole
Yes it is ****ALL**** about supply and demand. You can do all the regressions you want on what causes it to ebb and flow, but any stocks value is only dependent on what someone will pay for it.

For example, what caused the absolute collapse of Enron? Economic data? Nope. The fact that they had absolutely no profits? Nope. They had profits, just not what they advertised.

As a result investors and creditors lost complete confidence in them, and pulled credit lines and sold their shares. The price of the stock was not dictated by the intrinsic price of the company, but by what people were willing to pay for their shares. That is just a microcosim of supply and demand.

Like I said, in theory an open market isn't a pyramid scheme, but in practice it is.

Well, thanks for proving my point.

Enron'c collapse had nothing to do with confidence, it had to do with realistic expectations and hidden fundamentals. Enron's whole revenue model was built on fraud, considering that 80% of it's "profits" were not profits, but smoke and mirrors.

Those profits, and the growth rates they represented, were modeled and price targets assumed by the market. Once those targets were shattered and the growth rates *AND* revenue assumptiosn were gone, then 80% of Enron value disappeared also.

Furthermore, Enron had in placed hedging schemes intended to make money if Enron stock stayed steady or increased at a known (and artificially set) pace. Those hedging schemes, hidden in off-balance sheet SPV's, created lots of money in a steady or upward sloping environment. However, once the stock went down they were called, enron had to sell stock to keep up with the hedges, causing prices to go down, which then called more hedges, creating a downward spiral.

Take for example Apple. Now that the back dated options could eliminate some profits, it also scratches away at a pristine growth target and model assumption. Where profits were before, losses can be now, this throws off not only retained earnings, but *FUTURE PROJECTIONS* of those earnings *AND* the growth targets assumed.

You people assume that it's easily explainable by Enron or Apple, yet you have no fekkin clue! You quote Enron but have NO IDEA how the company worked (or didn't). You scratch the surface to suit your idiotic needs but don't dare learn more, because your foolish conspiracy theories would be proven wrong.

Sorry, but it is the truth.

 

[JS80]

Originally posted by: jjsole

Originally posted by: ElFenix
arguably, if a company doesn't pay as much in dividends but still has that income, then their capital is increasing and the stock price should increase accordingly anyway.

The stock price will not increase unless someone is willing to pay more for it than the last traded price.

And the reason why someone is willing pay more is that it's worth more than it was worth before meaning the company is making or is projected to make more money than it was before. DUH.

 

[vi edit]

Another analogy is that it's no different than buying something on sale and then ebaying it for more than you bought it.

I bought several hundred shares of AMTD when it was ~ $14 a share a few months back. I knew they would rebound. They had a record quarter last earnings call and also announced a major buyback in stocks. The stock was up to $18.50 at one point. I dumped off a few shares and am holding some back for this fall when I think they'll be in the low-mid 20's.

I bought MSFT when it was down around $22. It's now up to $24.60'ish. Decent return. I bought PFE when it was around $23 and now it's at just shy of $27. I've made some decent returns on the runs.

If you watch some stocks enough you know when they are undervalued, and when they are overvalued. Buy when they are being unfairly beat up, and sell once they recover.

Sounds simple, I know. But it really kind of is. I don't get caught up in high hyped IPO's. I don't buy into lucrative P/E's (GOOG, AMD). I'm not day trading and *needing* to make a quick sell.

If I don't like what I see I let it ride in a decent dividend earner (VZ or BPL for example) or just let it sit in the money market for 5% interest.

It's not a pyramid, it's just simply doing some research and not getting caught up in hype and hysteria.

 

[JS80]

Originally posted by: LegendKiller

Originally posted by: jjsole
Yes it is ****ALL**** about supply and demand. You can do all the regressions you want on what causes it to ebb and flow, but any stocks value is only dependent on what someone will pay for it.

For example, what caused the absolute collapse of Enron? Economic data? Nope. The fact that they had absolutely no profits? Nope. They had profits, just not what they advertised.

As a result investors and creditors lost complete confidence in them, and pulled credit lines and sold their shares. The price of the stock was not dictated by the intrinsic price of the company, but by what people were willing to pay for their shares. That is just a microcosim of supply and demand.

Like I said, in theory an open market isn't a pyramid scheme, but in practice it is.

Well, thanks for proving my point.

Enron'c collapse had nothing to do with confidence, it had to do with realistic expectations and hidden fundamentals. Enron's whole revenue model was built on fraud, considering that 80% of it's "profits" were not profits, but smoke and mirrors.

Those profits, and the growth rates they represented, were modeled and price targets assumed by the market. Once those targets were shattered and the growth rates *AND* revenue assumptiosn were gone, then 80% of Enron value disappeared also.

Furthermore, Enron had in placed hedging schemes intended to make money if Enron stock stayed steady or increased at a known (and artificially set) pace. Those hedging schemes, hidden in off-balance sheet SPV's, created lots of money in a steady or upward sloping environment. However, once the stock went down they were called, enron had to sell stock to keep up with the hedges, causing prices to go down, which then called more hedges, creating a downward spiral.

Take for example Apple. Now that the back dated options could eliminate some profits, it also scratches away at a pristine growth target and model assumption. Where profits were before, losses can be now, this throws off not only retained earnings, but *FUTURE PROJECTIONS* of those earnings *AND* the growth targets assumed.

You people assume that it's easily explainable by Enron or Apple, yet you have no fekkin clue!

I think you two are just disagreeing over definitions of words. To some people, trading equity at high values that are based on "future earnings" is effectively a ponzi scheme.

 

[Miramonti]

Originally posted by: LegendKiller

Originally posted by: biggerRIG
I think he was saying that the whole market is way overvalued.

In that case, even if it is overvalued now, then the entire market will *STILL* return inflation + equity premium, or 7-10% for probably the next 100 years.

Now, one thing to note about houses. According to most information, they have only appreciated 70% above inflation over the past 115 years, including a 50% jump in the last 10 years. To recap, houses have increased 20% for 105 years and 50% in 10, completely throwing off any good analysis. Even with this massive bubble, houses only returned .26% YOY for 115 years, adjusted for inflation.

Compare that to the stock market, returning ~5% YOY adjusted for inflation.

What's your point, schoolboy? The whole point of the thread is about whether or not the market is a pyramid scheme and your call people ignorant yet you don't even seem to understand at the fundamental level what drives it.

 

[LegendKiller]

Originally posted by: JS80

I think you two are just disagreeing over definitions of words. To some people, trading equity at high values that are based on "future earnings" is effectively a ponzi scheme.

I would agree that that's what he is thinking. However, that assumption is incorrect. I would also agree that this is pointless, because people won't learn if they don't want to, it's obvious these guys don't want to learn.

 

[JS80]

Originally posted by: LegendKiller

Originally posted by: JS80

I think you two are just disagreeing over definitions of words. To some people, trading equity at high values that are based on "future earnings" is effectively a ponzi scheme.

I would agree that that's what he is thinking. However, that assumption is incorrect. I would also agree that this is pointless, because people won't learn if they don't want to, it's obvious these guys don't want to learn.

Yes I agree with you, his assumption is incorrect. And yes, it's really futile to explain the market to lay people.

 

[Miramonti]

Originally posted by: LegendKiller

Originally posted by: jjsole
Yes it is ****ALL**** about supply and demand. You can do all the regressions you want on what causes it to ebb and flow, but any stocks value is only dependent on what someone will pay for it.

For example, what caused the absolute collapse of Enron? Economic data? Nope. The fact that they had absolutely no profits? Nope. They had profits, just not what they advertised.

As a result investors and creditors lost complete confidence in them, and pulled credit lines and sold their shares. The price of the stock was not dictated by the intrinsic price of the company, but by what people were willing to pay for their shares. That is just a microcosim of supply and demand.

Like I said, in theory an open market isn't a pyramid scheme, but in practice it is.

Well, thanks for proving my point.

Enron'c collapse had nothing to do with confidence, it had to do with realistic expectations and hidden fundamentals. Enron's whole revenue model was built on fraud, considering that 80% of it's "profits" were not profits, but smoke and mirrors.

Those profits, and the growth rates they represented, were modeled and price targets assumed by the market. Once those targets were shattered and the growth rates *AND* revenue assumptiosn were gone, then 80% of Enron value disappeared also.

Furthermore, Enron had in placed hedging schemes intended to make money if Enron stock stayed steady or increased at a known (and artificially set) pace. Those hedging schemes, hidden in off-balance sheet SPV's, created lots of money in a steady or upward sloping environment. However, once the stock went down they were called, enron had to sell stock to keep up with the hedges, causing prices to go down, which then called more hedges, creating a downward spiral.

Take for example Apple. Now that the back dated options could eliminate some profits, it also scratches away at a pristine growth target and model assumption. Where profits were before, losses can be now, this throws off not only retained earnings, but *FUTURE PROJECTIONS* of those earnings *AND* the growth targets assumed.

You people assume that it's easily explainable by Enron or Apple, yet you have no fekkin clue! You quote Enron but have NO IDEA how the company worked (or didn't). You scratch the surface to suit your idiotic needs but don't dare learn more, because your foolish conspiracy theories would be proven wrong.

Sorry, but it is the truth.

A little research would do you good. Their whole business model wasn't predicated on fraud, and they had numerous legitimate revenue streams, some of which are currently in practice today by you guessed it, Enron.

 

[iversonyin]

Originally posted by: jjsole

Originally posted by: ElFenix
arguably, if a company doesn't pay as much in dividends but still has that income, then their capital is increasing and the stock price should increase accordingly anyway.

The stock price will not increase unless someone is willing to pay more for it than the last traded price.

Thats the short term/intraday. You will find stocks that price close at certain price and open couple points higher the next morning. Anyone buy those stocks up? No. Its because theres are news on those stocks causing the price to adjust.

There is so much variables on stock price you can't pinpoint what exactly cause the price change. Buying and selling is important intraday while fundamental drive prices in long term.

 

[biggerRIG]

Originally posted by: JS80

Originally posted by: LegendKiller

Originally posted by: JS80

I think you two are just disagreeing over definitions of words. To some people, trading equity at high values that are based on "future earnings" is effectively a ponzi scheme.

I would agree that that's what he is thinking. However, that assumption is incorrect. I would also agree that this is pointless, because people won't learn if they don't want to, it's obvious these guys don't want to learn.

Yes I agree with you, his assumption is incorrect. And yes, it's really futile to explain the market to lay people.

Then explain to me how the market can sustain its huge demand growth rate? How can demand for securities possibly grow at a YOY rate of 5%+

 

[JS80]

Originally posted by: jjsole

Originally posted by: JS80

Originally posted by: LegendKiller

Originally posted by: jjsole
Yes it is ****ALL**** about supply and demand. You can do all the regressions you want on what causes it to ebb and flow, but any stocks value is only dependent on what someone will pay for it.

For example, what caused the absolute collapse of Enron? Economic data? Nope. The fact that they had absolutely no profits? Nope. They had profits, just not what they advertised.

As a result investors and creditors lost complete confidence in them, and pulled credit lines and sold their shares. The price of the stock was not dictated by the intrinsic price of the company, but by what people were willing to pay for their shares. That is just a microcosim of supply and demand.

Like I said, in theory an open market isn't a pyramid scheme, but in practice it is.

Well, thanks for proving my point.

Enron'c collapse had nothing to do with confidence, it had to do with realistic expectations and hidden fundamentals. Enron's whole revenue model was built on fraud, considering that 80% of it's "profits" were not profits, but smoke and mirrors.

Those profits, and the growth rates they represented, were modeled and price targets assumed by the market. Once those targets were shattered and the growth rates *AND* revenue assumptiosn were gone, then 80% of Enron value disappeared also.

Furthermore, Enron had in placed hedging schemes intended to make money if Enron stock stayed steady or increased at a known (and artificially set) pace. Those hedging schemes, hidden in off-balance sheet SPV's, created lots of money in a steady or upward sloping environment. However, once the stock went down they were called, enron had to sell stock to keep up with the hedges, causing prices to go down, which then called more hedges, creating a downward spiral.

Take for example Apple. Now that the back dated options could eliminate some profits, it also scratches away at a pristine growth target and model assumption. Where profits were before, losses can be now, this throws off not only retained earnings, but *FUTURE PROJECTIONS* of those earnings *AND* the growth targets assumed.

You people assume that it's easily explainable by Enron or Apple, yet you have no fekkin clue!

I think you two are just disagreeing over definitions of words. To some people, trading equity at high values that are based on "future earnings" is effectively a ponzi scheme.

A little research would do you good. Their whole business model wasn't predicated on fraud, and they had numerous legitimate revenue streams, some of which are currently in practice today by you guessed it, Enron.

Just because they had certain REAL revenue generating businesses doesn't mean the company's business model as a whole wasn't based on fraud.

 

[JS80]

Originally posted by: biggerRIG

Originally posted by: JS80

Originally posted by: LegendKiller

Originally posted by: JS80

I think you two are just disagreeing over definitions of words. To some people, trading equity at high values that are based on "future earnings" is effectively a ponzi scheme.

I would agree that that's what he is thinking. However, that assumption is incorrect. I would also agree that this is pointless, because people won't learn if they don't want to, it's obvious these guys don't want to learn.

Yes I agree with you, his assumption is incorrect. And yes, it's really futile to explain the market to lay people.

Then explain to me how the market can sustain its huge demand growth rate?

Not sure I understand what you're asking, but it's not a one sided market. There are plenty of short money that try bring bloated stock prices down.

 

[Miramonti]

Originally posted by: iversonyin

Originally posted by: jjsole

Originally posted by: ElFenix
arguably, if a company doesn't pay as much in dividends but still has that income, then their capital is increasing and the stock price should increase accordingly anyway.

The stock price will not increase unless someone is willing to pay more for it than the last traded price.

Thats the short term/intraday. You will find stocks that price close at certain price and open couple points higher the next morning. Anyone buy those stocks up? No. Its because theres are news on those stocks causing the price to adjust.

There is so much variables on stock price you can't pinpoint what exactly cause the price change. Buying and selling is important intraday while fundamental drive prices in long term.

There is only one variable that pinpoints price change, and that is what someone is willing to pay for it.

Stocks open up or down because people are willing to pay more or less for it the next day, and their volume to buy or sell exceeds the willingness of others to oppose the transaction at the same price that it closed at the previous day.

Its not rocket science folks.

 

[JS80]

All else equal, yes, an increase in demand in securities will push the stock price up but if it's too much above fundamentals there are plenty of shorts willing to sell naked for a profit.

 

[JS80]

Originally posted by: jjsole

Originally posted by: iversonyin

Originally posted by: jjsole

Originally posted by: ElFenix
arguably, if a company doesn't pay as much in dividends but still has that income, then their capital is increasing and the stock price should increase accordingly anyway.

The stock price will not increase unless someone is willing to pay more for it than the last traded price.

Thats the short term/intraday. You will find stocks that price close at certain price and open couple points higher the next morning. Anyone buy those stocks up? No. Its because theres are news on those stocks causing the price to adjust.

There is so much variables on stock price you can't pinpoint what exactly cause the price change. Buying and selling is important intraday while fundamental drive prices in long term.

There is only one variable that pinpoints price change, and that is what someone is willing to pay for it.

Stocks open up or down because people are willing to pay more or less for it the next day, and their volume to buy or sell exceeds the willingness of others to oppose the transaction at the same price that it closed at the previous day.

Its not rocket science folks.

Actually it is very close to rocket science. There are sophisticated computer models that help make the market. Look up program trading.

 

[LegendKiller]

Originally posted by: jjsole

Originally posted by: LegendKiller

Originally posted by: biggerRIG
I think he was saying that the whole market is way overvalued.

In that case, even if it is overvalued now, then the entire market will *STILL* return inflation + equity premium, or 7-10% for probably the next 100 years.

Now, one thing to note about houses. According to most information, they have only appreciated 70% above inflation over the past 115 years, including a 50% jump in the last 10 years. To recap, houses have increased 20% for 105 years and 50% in 10, completely throwing off any good analysis. Even with this massive bubble, houses only returned .26% YOY for 115 years, adjusted for inflation.

Compare that to the stock market, returning ~5% YOY adjusted for inflation.

What's your point, schoolboy? The whole point of the thread is about whether or not the market is a pyramid scheme and your call people ignorant yet you don't even seem to understand at the fundamental level what drives it.

I don't? ROFL! You are the one missing 70% of the equation while focusing on 30%.

Schoolboy? Hrm...yes, I have had lots of school. To run it down...

BS: Psychology, History (01)
MBA: Finance (03)
CFA (3 for 3) (started in 03, finished...today)

After going from under to grad, I started as a Jr. Analyst in securitization, moved to analyst a year later, then Sr. Analyst the year after. Switched companies and started as a securitization manager, I will probably be a director or above in 3 years. So yeah, it's all "schoolboy".

You're outclassed and outsmarted. Go back to reading "Rich Daddy Poor Daddy" and quite spreading FUDD.

 

[iversonyin]

Originally posted by: jjsole

Originally posted by: iversonyin

Originally posted by: jjsole

Originally posted by: ElFenix
arguably, if a company doesn't pay as much in dividends but still has that income, then their capital is increasing and the stock price should increase accordingly anyway.

The stock price will not increase unless someone is willing to pay more for it than the last traded price.

Thats the short term/intraday. You will find stocks that price close at certain price and open couple points higher the next morning. Anyone buy those stocks up? No. Its because theres are news on those stocks causing the price to adjust.

There is so much variables on stock price you can't pinpoint what exactly cause the price change. Buying and selling is important intraday while fundamental drive prices in long term.

There is only one variable that pinpoints price change, and that is what someone is willing to pay for it.

Stocks open up or down because people are willing to pay more or less for it the next day, and their volume to buy or sell exceeds the willingness of others to oppose the transaction at the same price that it closed at the previous day.

Its not rocket science folks.

Well then....that doesn't sound like a ponzi scheme, does it?

Its only a SCAM when you don't know how to value stocks. Only then the market turn into a casino.

 

[JS80]

Originally posted by: LegendKiller

Originally posted by: jjsole

Originally posted by: LegendKiller

Originally posted by: biggerRIG
I think he was saying that the whole market is way overvalued.

In that case, even if it is overvalued now, then the entire market will *STILL* return inflation + equity premium, or 7-10% for probably the next 100 years.

Now, one thing to note about houses. According to most information, they have only appreciated 70% above inflation over the past 115 years, including a 50% jump in the last 10 years. To recap, houses have increased 20% for 105 years and 50% in 10, completely throwing off any good analysis. Even with this massive bubble, houses only returned .26% YOY for 115 years, adjusted for inflation.

Compare that to the stock market, returning ~5% YOY adjusted for inflation.

What's your point, schoolboy? The whole point of the thread is about whether or not the market is a pyramid scheme and your call people ignorant yet you don't even seem to understand at the fundamental level what drives it.

I don't? ROFL! You are the one missing 70% of the equation while focusing on 30%.

Schoolboy? Hrm...yes, I have had lots of school. To run it down...

BS: Psychology, History (01)
MBA: Finance (03)
CFA (3 for 3) (started in 03, finished...today)

After going from under to grad, I started as a Jr. Analyst in securitization, moved to analyst a year later, then Sr. Analyst the year after. Switched companies and started as a securitization manager, I will probably be a director or above in 3 years. So yeah, it's all "schoolboy".

You're outclassed and outsmarted. Go back to reading "Rich Daddy Poor Daddy" and quite spreading FUDD.

ROFLPWNED

 

[LegendKiller]

Originally posted by: jjsole


A little research would do you good. Their whole business model wasn't predicated on fraud, and they had numerous legitimate revenue streams, some of which are currently in practice today by you guessed it, Enron.

Somewhere in there you missed basic math, considering I said 80% of their revenue was based on fraud (including fraudulent energy trading, removal of debt through SPE's, hedging with SPE's...etc).

I actually know a lot about Enron, I had to study it in depth to understand FAS 133, derivatives accounting, well enough. I also did a presentation on Enron for a 100 person panel during my graduate work.

 

[LegendKiller]

Originally posted by: biggerRIG

Originally posted by: JS80

Originally posted by: LegendKiller

Originally posted by: JS80

I think you two are just disagreeing over definitions of words. To some people, trading equity at high values that are based on "future earnings" is effectively a ponzi scheme.

I would agree that that's what he is thinking. However, that assumption is incorrect. I would also agree that this is pointless, because people won't learn if they don't want to, it's obvious these guys don't want to learn.

Yes I agree with you, his assumption is incorrect. And yes, it's really futile to explain the market to lay people.

Then explain to me how the market can sustain its huge demand growth rate? How can demand for securities possibly grow at a YOY rate of 5%+

Dear lord, IT ISN'T DEMAND THAT GROWS. It's the return that companies must make in order to satiate that demand and the revenues that generates that grows at 5%+.