Hacker News Board Hacker News, browsed like a classic message board
Live data from Hacker News

The Crash of ’87, from the Wall Street Players Who Lived It

bloomberg.com

Post reply on HN
Print view View original

61–70 of 164 posts

Re: The Crash of ’87, from the Wall Street Players Who Lived It

#61

Post by pjc50 »

marak830 wrote: post #14
lifebeyondfife wrote: post #12

Earlier quoted context omitted.

At the very highest level, you have two groups of people: investors and businesses. Investors have capital, and want to see somebody produce something extra with that capital. The main variables are the size of the capital, and the risk profile the investor is prepared to accept. Businesses require funding to grow[1]. The main variables are the nature of the reparations, and the control they are willing to concede. T…

I see and almost understand what you are writing, but how does this help the original business. Say I'm business A. I'll offer a portion of my business (say 40%) with the offer that you will reap 40% of my profit. (Assuming one person pays in for that whole value).(edit: I offer this as the income will allow me to expand where as otherwise I'd have to wait longer depending on profit) At what point does almost anythin…

The more lively the capital market is, the more money is available and the better deal the company get when getting money from the market. This is why companies prefer to list themselves on the bigger, more famous exchanges.

If you need $100m, it matters whether you're giving up 10% or 20% of the business for that money.

(A major benefit to the public of financial markets is diversified pension funds with good returns, btw)

Re: The Crash of ’87, from the Wall Street Players Who Lived It

#62

Post by sokoloff »

marak830 wrote: post #18
liotier wrote: post #11

Earlier quoted context omitted.

> What benefit does the stock market provide to us ? Direct benefit: liquidity - whether you need to buy or to sell, you have a place where you'll find a counterpart quickly. Indirect benefit: information - just watching the bets lets you have an idea about how much people with skin in the game value things, letting you take better decisions about resources allocation.

The direct I can understand, I want to sell a portion of my business on the bote that I will give that direct portion profit to the holder. How would any of the other trading help my business, or anyone else?

Same reason that a $100 bill is worth more than a $100 gift card to a specific store.

The presence of the secondary market makes the initial offering (sales) of shares easier.

Imagine company A is making a primary offering (direct sales of shares from the company to an investor), but that those shares do not have a ready secondary market.

Imagine company B is making the same primary offering, but there is a deeply liquid secondary market.

Company A and Company B are otherwise identical (line of business, revenue, profit, outlook for the future, etc). Investors will much more readily invest in company B.

Re: The Crash of ’87, from the Wall Street Players Who Lived It

#63

Post by eru »

marak830 wrote: post #18
liotier wrote: post #11

Earlier quoted context omitted.

> What benefit does the stock market provide to us ? Direct benefit: liquidity - whether you need to buy or to sell, you have a place where you'll find a counterpart quickly. Indirect benefit: information - just watching the bets lets you have an idea about how much people with skin in the game value things, letting you take better decisions about resources allocation.

The direct I can understand, I want to sell a portion of my business on the bote that I will give that direct portion profit to the holder. How would any of the other trading help my business, or anyone else?

The possibility of that trading induces your first buyer to give you a higher price as the first seller.

(Similar to how money or even bitcoin is only useful if you can pass it on.)

Re: The Crash of ’87, from the Wall Street Players Who Lived It

#64

Post by eru »

technofire wrote: post #38
marak830 wrote: post #22

Earlier quoted context omitted.

Direct: I can understand. Indirect: that seems like a losing game. Why would gambling on a companies future ever help anyone(except the lucky?).

> Why would gambling on a companies future ever help anyone Most transactions in the market are not gambling. Trades happen, yes, but that is because the prospects of companies are continually changing. When it became apparent pretty much everyone would move to Netflix and streaming video, would you want to continue holding Blockbuster stock? No; you would want to sell it. People who simply "gamble" in the market los…

> [...] would you want to continue holding Blockbuster stock? No; you would want to sell it.

For every seller, there's a buyer. The market will settle on a price at which those are evenly matched---even if that's close to zero.

You have to offer a good enough price on your Blockbuster stock to find a buyer who thinks it's a good idea. (Unless it's someone who has to cover a short position, those guys are basically forced to buy. But they'll still buy from the seller with the best price.)

Re: The Crash of ’87, from the Wall Street Players Who Lived It

#65

Post by eru »

KGIII wrote: post #43
marak830 wrote: post #16

Earlier quoted context omitted.

What I see from this is a while bunch of hand waving to say that 'there are a whole bunch of people between you and x business', despite the fact you can directly purchase their shares(which they offered to gain temporary income to make purchases before their cash flow allowed). I still don't see a reason why these people between you and the business have any useful reason to exist. Unless for gambling, Wich as far a…

I wouldn't buy shares in your company unless I had the legal right to trade and sell those shares to others. When I invest, I'm not just supporting you, I'm supporting me.

Or at least you'd ask for a serious discount to give up those rights.

Re: The Crash of ’87, from the Wall Street Players Who Lived It

#66

Post by sokoloff »

gjulianm wrote: post #58
consz wrote: post #26

Earlier quoted context omitted.

>Everything else seems likes gambling, imho, and I still can't wrap my head around why it's allowed. Let's even suppose you're right, and it is only gambling -- why should it be disallowed?

Because it is gambling with real world consequences. Stock markets influence company behavior which in turn have very real effects over people lives (layoffs, salary reductions, increased hours). So it is a conflict of interests between people that are gambling and people who are just going around with their lives but have no power to counter market gambler movements.

I think you're ascribing more market->company linkage than is actually present, possibly significantly more.

The market (in general) rewards companies who show a prospect of increasing profits. In other words, they reward healthy company behavior the same way that a calendar would reward an effectively competing company or a biological entity (with continued survival and thriving).

It's an imperfect mechanism for sure, but in general, healthy companies get rewarded and unhealthy companies get pressure to become healthy or to die. I don't see that the problems outweigh the benefits.

Re: The Crash of ’87, from the Wall Street Players Who Lived It

#67

Post by liotier »

gjulianm wrote: post #54
lmm wrote: post #39

Earlier quoted context omitted.

> Why would gambling on a companies future ever help anyone(except the lucky?). Prediction markets are the most efficient way to make societal decisions; they allow everyone to combine their information and predictions without having to directly coordinate with each other. There's academic literature arguing they'd be the best way to do politics etc. At the moment all we do with them is capital allocation, but that h…

Sorry but I have to make the precision: market optimized for monetary output and not necesarily social good. Companies doing well in the stock market might be exploiting workers, unnecessarily exposing consumers to different dangers, destroying the environment or a plethora of any other bad things and the stock market would not care as long as it does not create a PR problem that could affect sales of the company. Si…

> Companies doing well in the stock market might be exploiting workers, unnecessarily exposing consumers to different dangers, destroying the environment or a plethora of any other bad things and the stock market would not care

That would be regulatory failure - it is not the market's fault if the government is weak... Fix the government, get decent labor laws, let companies internalize externalities, regulate environmental impact !

> Similarly, a company that does well socially (e.g, a public hospital) but not economically would get obliterated in the stock market

Which is why, in civilized countries, public services are provided by the government or on behalf of the government.

Foisting government responsibilities upon the market is bound to create disappointment...

Re: The Crash of ’87, from the Wall Street Players Who Lived It

#68

Post by Retric »

dagw wrote: post #50
Retric wrote: post #46

Earlier quoted context omitted.

No not most people. But, if you own 60% of a company it can take a long time to unwind without impacting the price. Further the transion is smooth as selling 1 million in most stocks in a second would change the price. Anyway, my point is simply that trades are the mechanism that changes price. So, you can't expect to sell arbitrary amounts of stock at the current clearing price.

How many people own 60% of a publicly traded company?

Worldwide probability less than 20. But again that's just the extreme that demonstrates what's gong on. If you ever watch a stock ticker and calculate the volume of sales needed to change the price it's less than most people assume.

+/- a few cents might not seem like much but drops can spiral with relatively small initial sales.

Re: The Crash of ’87, from the Wall Street Players Who Lived It

#69

Post by bgun »

technofire wrote: post #45

Does anyone else find it surprising and remarkable that Paul Tudor Jones' monospaced letter is perfectly flush on the left and right margins with apparently no hyphenation nor additional inserted spaces within the lines? Surely this did not happen by coincidence (?).

Definitely not monospaced. These four words are all 5 letters but different lengths. https://i.imgur.com/Iq6cVhl.png

Re: The Crash of ’87, from the Wall Street Players Who Lived It

#70

Post by Tyrek »

marak830 wrote: post #7

A side note, and I'm really hoping someone can explain this. What benefit does the stock market provide to us? I understand investing in companies, but for me, and I'll admit a completely naive person to this whole system, it seems to have taken an 'inbest in company with money to help them succeed', to a 'who cares let's just cut and run to make the best profit'. I'm perfectly willing to take a link to a great expla…

Liquidity. The fundamental problem with pre-financial markets is the inability of those with money (investors, both large and small) to connect effectively with those who need money (business owners, etc). Often, you needed some sort of personal connection in order to invest or seek investment from others. The financial markets provide a more efficient way to connect the two parties, based on mutually accepted standards (financial statements, public disclosures, etc), which forms the basis of public offerings.

Once the stock has been released to the public, the market remains a valuable tool for the market to determine price, both among investors and for the company (buybacks and additional offerings primarily).

And this is just a simplified model of the equity markets. Add debt, derivatives, FX and various futures, and it gets more complicated.

Post reply on HN