[quote=70Degrees][quote=SK in CV]
To a great extent, that is hogwash. If you log into your etrade account, and purchase 100 shares of Ford, it does nothing to further economic development. It has no effect on whether Ford expands their workforce or opens a new plant. It provides no new capital. Same logic applies to the billions of dollars that are traded daily on the world’s exchanges for common stocks, mutual funds, ETF’s or the secondary markets for fixed income securities. IPO’s, initial direct investments in new companies provides that capital. A tiny fraction of the total invested capital.[/quote]
What this provides is liquidity. Without liquidity the market would not exist – at least not at anything resembling the scale it does now. As someone else said, the ford family was able to sell in the first place because the new buyer knew they had some liquidity. As a result, that initial sale got a higher price than it otherwise would have.
Likewise, when the company subsequently made offers of new stock, the same apllied. Those new offers provided capital to the company that it uses to expand and create jobs. In the absence of the ability to sell shares, those investments in ford people made would have looked more like donations to ford. And i think thats how it would be treated if massive changes to the treatment of invested income were introduced – prices would tank to compensate for the increased tax.
None of those ipo’s would exist if the new buyers didnt think they could sell their stock.
Although a fun armchair exercise there are so many trickle down effects of any taxation change that i dont think we’ll realy see anything major anytime soon.[/quote]
Ultimately, a stock’s value should be based on profit and dividends. You can always sell an income stream. IMHO, the damage isn’t really done by J6 buying 100 shares of Ford, but by the high-frequency traders and large arbitrage trades made by those who have no personal use for the stock/income stream.
