Is shareholder a parasite?

Just thinking a little bit mechanics of economy.

So... If I have worked hard and become multimillionaire, I have earned my money, OK.
When my children inherits me they can choose to live only by dividends of shares (not sure if right expression, sorry to torture your english language
So with incomes from your shares you can live just by sucking profits when working people do the work.
Parasitical relationship without doubt
You can't have slaves legally anymore, but this easier.
Working people don't eaven notice to been sucked, when owners have pipe in your veins
Your vampires! You have been busted
What do you think folks? Do we have a case?

[edit on 4-3-2006 by HoHoFoo]

What do you think folks? Do we have a case?

Yes its a zero sum game.

[edit on 4-3-2006 by city trader]

So you say that people who work hard for their money should have worked for nothing because...ohh...when you die it's all worthless.

I work so that my great great great great great grand children will be well to do...that's all that's worth doing.

So you say that people who work hard for their money should have worked for nothing because...ohh...when you die it's all worthless.

I dont no if you know how our debt based economy works. If you do a search here or web, you may be quite surprised.

This was just a test.

[edit on 15-3-2006 by intrepid]

I wouldn't call shareholders parasites. Regardless of how long ago it was, way back when, the company issued shares and someone who was hard-working bought them. This means they have a share in the ownership of the company. So they aren't really parasites at the lowest level, sucking money out of the company, they're at the other end of the spectrum, actually owning part of the company. Seems fair enough. If the company didn't want it to happen, they wouldn't have publicly issued shares. And it would take a heck of a lot of a shares to live entirely off of dividends, anyway.

The shareholders aren't parasites. They are an essential part of the capitalist system.

The investor's role in our society is to provide capital for the development and operation of businesses. This creates an opportunity for those without capital of their own to build a successful company, by raising money by selling shares in their business.

The shareholder takes on the financial risk, which is significant.

More importantly though is their role as allocators of investment capital. They must choose from a huge array of potential investments, and correctly identify those that will succeed, generate the most economic activity, and ultimately benefit the most people. Those who choose well will make money they can invest in other companies, or spend and create economic activity directly. Those who can't identify successful businesses will lose their capital, and thereby their role in the selection process. Darwinism at it's purest.

it's actually a very fair system. Anyone with a good enough idea and the ability to implement it is thus able to raise the money required to build their business. Anyone can choose to become a shareholder and buy a stake in a company themselves. In fact, that's how most people intend to fund their retirement, whether they realise it or not. Mutual funds, 401k's IRA etc are by and large holding vehicles for shares.

And as a Shareholder, I would suggest the originator of the thread become more familiar with the economic system he attempts to "slam."

I worked my entire life to get where I am now and saying that, I have made some money, yet I have lost some as well. All part of the business.

Not a parasite, an independent investor.

Semper

Nope, not a parasite. They provide working capital that the company doesnt have to pay back. This way they can grow the company and the shareholders take a risk in making or losing money.

hey there HoHoFoo,

i'd say 'dividends' are a symbiotic relationship rathen than a parasitical one.

the % of companies that even pay dividends is small.
but the companies chose to pay dividends so their share value might increase,

other companies generally get into stock-buy-backs to decrease the # of shares outstanding, so their share value might increase.

both methods have their following, that is up to the boards-of-directors to determine...both business models 1st desire their market share of product/service to expand,

myself, I only invest in 'dividend paying stocks', for many reasons,
one reason being that in the last 3-5 years the public has realized that
'dividend paying stocks' , being un-glamorous, had/have a better record
of increasing and sustained value.

On the other hand, what Yarcofin said;

...And it would take a heck of a lot of shares to live entirely off of dividends, anyway.

is an important element- - because the average dividend rate is somewhere around 3-4%, and over most other, historical, 5yr investment terms
it would have been better to invest money in higher yielding Money Market Certificates of Deposit issued by banks than just getting 3-4% from dividends.

[if you figure for example Ralph Nader who lives on $26,000.yr
the investment required to receive $26k in dividends would be enormous,

LNCE, the snack cracker co. pay .64per year per share, shares sell for ~$24.oo
that means Nader has to own 40,625 shares of Lance Inc
that means Nader had to spend $975,000.oo to receive that income

**in the meanwhile, he risks losing it all, thru bankruptcy, business failure, the Boad deciding to no longer pay dividends, absolutely none of that $975K is FDIC insured]
....parasite, Indeed!.......

How can a shareholder be considered a parasite, when it is from shareholders that captial is raised? Dividends are the return on one's investment and, one might argue, compensation for the risks one takes when one invests.

I live in poverty, so forgive me, if the nuances of economics evades me.


[edit on 2006/8/6 by GradyPhilpott]

well, let's see....

a company decides it wants to raise some capital, so it decides to sell 1000 shares of stock. 1000 people buy their one thousand shares of stock...they've invested in the company. then 500 of those people sell their shares of stock to other people for let's say $10 more than what they paid, they've made a ten dollar profit, along with the money that they invested in the company. the person who just bought the stock, well, they now have an investment in the company, but the company already gained their capital from the original buyer, so well, the second buyer really didn't contribute to the capital of the company, did they? and does the company recognize the new "value" or the stock if the new owner of it decided to cash it in to them? did the company's assetts magically increase by ten dollars when he bought the stock?

I think the parasites are plentiful in our society, and include those who buy the stocks and flip them for the profit....those who buy the houses, just to flip them for a profit, ect.....they do wonders to drive up the percieved value of the things without adding any real tangible value to them.

Originally posted by dawnstar
then 500 of those people sell their shares of stock to other people for let's say $10 more than what they paid, they've made a ten dollar profit, along with the money that they invested in the company. the person who just bought the stock, well, they now have an investment in the company, but the company already gained their capital from the original buyer, so well, the second buyer really didn't contribute to the capital of the company, did they?

Not directly, no. However this new owner (I'll call him the "trader"), is the reason the initial investor put his money up in the first place. as St Udio points out, dividend returns are generally very small, if the exist at all. To make the risk worthwhile, the investor is counting on this increase in share value to take their profit. If the company doesn't succeed, the share price could drop to 0.10 cents just as easily as it could rise to $10. In fact historically, the former is FAR more likely!

And the trader, who buys at $10 is doing so in the hope the share price increases further. This will only happen though if the company performs well and enough other traders/investors hold the view that the company will grow and be able to pay larger dividends at some point in the future.

The trader therefore provides the liquidity in the market that allows investors to buy and sell shares when they want too. This keeps the "capital allocation" aspect of the system running efficiently.

and does the company recognize the new "value" or the stock if the new owner of it decided to cash it in to them? did the company's assetts magically increase by ten dollars when he bought the stock?

no. An increased share price however means the companies overall value, or "market capitalization" increases. The company can then issue more shares at a higher price should it need to. More commonly the company is able to use this "asset creation" potential as security against which to borrow.

Basically, the higher the share price, the more valuable the company, the greater the value of shares one could issue and offer as security, the more they can borrow to expand.

Great explaination guys. There is nothing parasidical about it. Its the main reason the US has such a srong economy and why we are as well off as we are.

Its the way the market works.

Great explaination guys. There is nothing parasidical about it. Its the main reason the US has such a strong economy and why we are as well off as we are.

Its the way the market works.

so, the companies can borrow against PERCIEVED value...just like many homeowners have borrowed agianst the inflated PERCIEVED value of their home...

when the perception changes, which sooner or later, I got a feeling it will, well, we end up with alot of businesses and people with alot of debt along with a more realistic vision of their assetts. and this is good?

the percieved increase in value is being by speculation, people believing the value will increase. just because they believe it, doesn't mean it's true. and in the case of stocks, I got a feeling that sometime in the next few decades or so, the values will go down. mainly because the baby boomers will start liquidating their assetts for use during their retirement....dumping their stocks on the market. the houseing market will start losing it's percieved value as soon as the fed faces the fact that regardless of the effect increasing interest rates have on the economy, those rates need to go up, or inflation will be out of control.

in plain simple words the speculators, who aren't interested in any long term investment but rather a quick profit by flipping that peice or real estate or stock at a higher price, are the winners, the actual investors are the loser.....the speculators are driving up the buying price by their demand, while in actuality, the actual value isn't near that, and the long term prospect for the assett is even dimmer....

of course the gov't is also a winner when it comes to real estate, since well, a long term investor in a home gets stuck with the higher property taxes the inflated value causes....

but the speculator walks away with a nice profit, so it's okay.


and of course, since so many people are partial owners of the corporation, they will overlook the pathetic wages these companies are paying their employees...since hey, that's making a bigger profit, which might make their value increase a few pennies.....of which uncle sam will end up taking since all those underpaid employees aren't paying any taxes, and may in fact be patially dependant on uncle sam for their needs...

but, it's all a nice perception, even if it's not reality...

Originally posted by dawnstar
so, the companies can borrow against PERCIEVED value...just like many homeowners have borrowed agianst the inflated PERCIEVED value of their home...

when the perception changes, which sooner or later, I got a feeling it will, well, we end up with alot of businesses and people with alot of debt along with a more realistic vision of their assetts. and this is good?

Debt affects businesses and people in different ways.

People borrow money so they can have that new car, or swimming pool, or must-have pair of Jimmy Choos. When a person gets over their head in debt, they have a problem.

Businesses borrow money to invest in capital investments (new machines, more outlets, etc) for the sole purpose of making more money. . If a company gets over it's head, investors see this, see that the chances of earning a dividend is getting more remote, and sell their shares. This drives the price down and down until the company itself becomes attractive as an asset to another company.An otherwise profitable company with too much debt is a prime takeover target, and will most likely be bought as a going concern by a rival or other company looking to pay off the debt and turn it around. This company keeps operating, the workers keep their jobs... the ones who suffer are the shareholders who misjudged the company.

in plain simple words the speculators, who aren't interested in any long term investment but rather a quick profit by flipping that peice or real estate or stock at a higher price, are the winners, the actual investors are the loser.....the speculators are driving up the buying price by their demand, while in actuality, the actual value isn't near that, and the long term prospect for the assett is even dimmer....

you're missing the other side of the coin. Speculators drive prices BOTH ways, not just up. Anyone buying an asset for the long term, be it shares, real-estate, art or anything else, should understand this, and hold off until the right time to buy. In stocks for example, If you're planning to build a share portfolio over the next 20 years, waiting a year or two until the time is right shouldn't be a problem. The dot.com boom of the late 90's led to the crash of the early 00's, speculators drove prices so low that some amazing bargains were to be had by 2003.

The same happened with housing in the early 90's, and the same may happen again, once the huge numbers of buy-to-let-ers, get over stretched with their interest payments. Even now, good fixer-uppers are becoming hard to find, and lots of flippers are going to be making a loss. the winners in this case will be the regular home-buyers, who will have a wide choice of "fixed up" homes to choose from, as the housing speculators panic and dump their properties.

But what about those who need somewhere to live now? aren't they victims of the speculator led boom? Well, when house prices are very high, rent is often more affordable than a mortgage payment. They should simply wait, and look to invest the money they would have been spending on home repairs/improvments, on other investments. Sure, it feels better to get a foot on the property ladder, but when house prices are super-inflated, that my well turn out to be more of a "property slide", or at "property park-bench", going nowhere, up nor down.

For the long term investor, who is prepared to do a certain amount of research, all speculator driven booms and busts are a blessing. We can study the past and learn to spot some amazing opportunities. Anyone could have bought a house in the 90's for 100k, sold it for 200k in 2001, bought Apple computer shares in 2002 with the 100k profit and be sitting on almost a million dollars today. that's just one example. There are millions of variations... for those who are prepared to learn how to spot them, and delay the new swimming pool for a few years.....

Think of the lottery. Buy a ticket, you could win millions, for just buying a ticket. But you are not only buying a ticket to increase your financial standings, you are also providing young Timmy with books for school, a protractor and ruler for little Suzie's and Carlos's audio tapes for him to learn English so that he may go back home and teach the rest of the family of illegals how to speak English so that when the senate passes new legislation they will be able to apply for financial loans out the ying yang, take your job thus forcing your wife to divorce you and take the kids to live with her mother while you to live out on the streets selling yourself for odd jobs and begging, of all people, Carlos's family for change so that you can go buy your last 40 oz just before you jump off the bridge thinking "Why did I buy that damn lottery ticket!?"

Stocks are valued at the companies current asset worth plus their expected earnings in the future. Speculators can make money and can lose money just as long term investors can.

Warren Buffet is a long term investor but even he says every decision he makes doesnt alway work out the way he thought.

Playing the stock market is just like playing a game, you have to have knowledge to expect to win. No one is screwing anybody( except for insider tading and like illegal actions), they are just smarter and in some instances luckier than you.

Money is a conversion of life force. Some people squander their life force on instant gratification and frills, while others pack it a way and let it compound.

If putting life force to work is parasitic, then all humans would be considered parasites.. You can't detached money from humanity and label only one evil, same thing goes in regards to investments, loans, banking, commodities, etc.

Everyone feeds off of something, maybe you should call it global monetary cannabalism