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The #Ponzi Factor | The #Stock_Market is a #Ponzi_Scheme EXPLAINED.
NOTE: #Stock_buybacks are #NOT returns/dividends because the firms just #print_shares after the #buyback AKA #DILUTION
The Ponzi Factor is the most #comprehensive research #ever_compiled on the #negative_sum nature of #capital_gains—the money #people make from buying and selling stocks. Unlike other finance books, this book does not #assume stocks are #ownership_instruments. It #investigates the #ownership_assumption and asks, “Why are stocks ownership instruments if the owners #never_receive_money from the companies they #own?” Most people don't #realize that #profits from buying and selling stocks come from #other_investors.
When one investor buys low and sells high, another investor is also buying high and needs to sell for even higher.
Companies like #Google, #Telsa, #Facebook #never #pay their #investors. Their #investors_profits are #dependent on the inflow of money from #new_investors, which by #definition, is how a #Ponzi_scheme works.
History shows that the association between stocks and ownership came through dividends—a profit-sharing agreement between the shareholders and the businesses they owned, which is also why all stocks paid dividends before the 1900s. The idea of non-dividend stocks is a new concept that came about over the past century. At some point, the academics and regulators decided it was okay for companies to issue stocks and avoid paying their investors indefinitely. But their acceptance of this new form of ownership—Ponzi assets—was through tradition (and possibly corruption), but not with any research or logic.
The sad truth is, people in finance do not study history and don’t know the difference between a value that comes from the exchange of money (a cerebral idea) and the money that is being exchanged (a possessable item). The product of this ignorance is a system and culture that treats Ponzi assets as ownership just because they’re printed by a company. It doesn’t matter if the company makes money, losses money, pays nothing, or prints as many shares as they want. If a company prints it, it’s ownership. This kind of shoddy logic doesn’t work in other industries, but it is the norm in finance.
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