Elon Musk just lost $4.6 billion on Tesla and SolarCity

[Corporate666]

If the numbers would reflect the actual value of physical stuff, then i would agree with your first premise. But that's not how it seems to work.

That is how it works.  What do you consider "the actual value of physical stuff"?  What defines the value of something?  It's whatever someone is willing to pay for it.  Keysight doesn't make a new scope and figure out their costs and add "a reasonable profit" and sell it for that.  They try to make stuff as cheap as possible and sell it for as much as the market will bear.  The "value" of something is whatever someone will pay.  That goes equally for stocks as well as physical items.

I can open up a shop, put 100k into it, and then issue 1000 shares at 100 bucks each.  Overnight some drug addled wallstreet bozo goes on a frenzy, and suddenly each share is "worth" 200 bucks. But i still have the same stuff, nothing changed. The extra 100k are virtual, non-existant in the real world.

That extra 100k is no different than 100k worth of the value of your house or whatever else your net worth is comprised of.  And you do yourself a disservice to bash finance people as "drug addled wallstreet bozos".  If it was so easy to earn huge money as you suggest, why wouldn't you do it?  You don't want to earn money?

I'd like to see where Musk has lost real 4.6 billion. What is the actual worth of the physical stuff in his fabs? From that substract the profits already made. What is left?

Of course he has lost real $4.6b - because he could sell his share in the company and convert that asset into cold hard cash. It's not an intangible thing that exists only on paper, like the "value" of a college education.  It's real money.

[Corporate666]

That's the thing i have a problem with. All that "IP". Given the fact that we have billions of people on this planet, the chance that a _single_ individual comes up with some nifty idea is basically non-existant. Usually a lot of people come up with the same thing. It's just that the idiotically messed up patent system grants stuff to only one. Yes, i know, patents can be challanged. But in reality, Joe Inventor has basically no chance to stand up against Billy Corporate.

Which is to say: Yes, your idea may be worth something. But basing that worth on the assumption that you have been the only one to come with it is just idiotic. You can be sure that many more people came up with the same thing, but either decided it's not worth a patent, or simply couldn't afford it.

You misunderstand IP law.

You can't patent an idea.  Nobody can.  You can only patent an actual invention.  It's a substantial difference and eliminates the problem of "many people would have had that idea", because it doesn't matter.  Ideas don't mean a thing. The *implementation* of the idea matters. 

The 'injustice' of the IP system as you describe above effectively does not exist.  Anyone can secure a provisional patent for just a few bucks and then either work on the actual patent or if they are as broke as you imply, they can shop the idea to people with money.

The problem is not inaccessibility of IP to lower wealth folks, but rather a problem of hustle and ambition.  You don't achieve success (or deserve to achieve success) merely for having an idea but rather for implementing an idea and then doing something with that implementation.  And everyone has the right to apply for IP protection if they choose.

[Corporate666]

Sorry to readers to spam the thread - my last response

High frequency traders only exploit the flaws that the system already has. Sure, they basically do a good job at highlighting the flaws, but they didn't create those flaws.

No, HFT's don't exploit flaws in a system... they provide liquidity.  If it was only institutional investors then there would be no movement in stocks.  If day (and faster) traders added no value they would fail to earn money.

Simple logic: We all live on a finite sized rock floating in the finite milkiway. It is impossible to have constant growth. At some point, the resources are gone. The basic idea that a company is only worth something as long as it can grow is fundamentally flawed. It may be able to grow for some period of time, at the cost of some other growth, but it just can't grow forever. Anyone who "invests" in some comapny, expecting constant growth, thus making the owned shares more and more valuable, is a leech. It just can't be done long term.

The above is fundamentally wrong.  The market is not finite, and A earning money does not take from B.  Wealth is created and destroyed, not simply passed around.  Companies can grow indefinitely and constant growth is not unachievable at all.  The notion that people who invest for long term growth are "leeches" is laughable.

[c4757p]

I fail to see how an "implementation of an idea" is not itself an idea. It's just a relatively specific one. All you're saying is that there's a cutoff to how broad or specific the idea that you patent is allowed to be.

[mtdoc]

Banks are in the business of intermediating: getting buyers and sellers of risks together. Today's banks do a lot of that as well. For example, they originate loans to consumers and sell those loans to investors. In that process, consumers get inexpensive loans (than otherwise possible) and investors get paid for taking risks.

That's how it used to work under Glass-Steagall.  Since its repeal in the late 1990s those lines no longer exist. The large majority of consumer loans are made by the big banks who also directly invest, speculate and take highly leveraged risks.  That is - after all - what the 2007-2008 crisis was all about.

What happens in debt-driven societies, unfortunately for the banks, is that lots of consumers overestimated their ability to pay and see a larger and larger chunk of their income going to the banks (then going to the investors).

 

The truth is that banks benefit from a debt driven society - and in fact would not exist in their present form without a debt driven monetary and financial system - as all modern systems are (for better or worse).

In the US, the entire fractional reserve banking system (and with it government and consumer debt) has expanded enormously beginning with Nixon's closing of the "gold window" in 1971 then picking up speed with the 1980s deregulation of consumer banking and then reaching critical velocity with repeal of Glass - Steagal in the late 1990s..

This enabled both a major expansion of both government and consumer debt in a "borrow and spend" binge which allowed expansion of GDP without commensurate expansion of real wealth. The 07-08 crisis was the start of the chickens coming home to roost (round 2 to start in 1,2,3..)  Since then all stops are being pulled out to prevent the party from ending and get consumers to resume the borrow and spend binge. (As if more of the same thing will fix the problem.. ) Goverment - alas - has had no problem continuing its borrow and spending binge.

 

Being stupid, those consumers resent the banks for (having made a loan to them and) insisting on getting paid, on behalf of the investors.

What consumers actually resent is the banks taking leveraged risks with their money - then being bailed out by the government when their bets went wrong.(and that resentment is something both Trump and Sanders are benefiting from). In fact it was the bond holders who insisted on getting paid.

I think you will find a significant deterioration of standards of living in most western countries (Germany and Japan may be the exceptions) if the banking industry is as severely regulated as Ms. Warren had wanted.

In actual fact - the most prosperous period in history for the USA was the period under Glass -Steagall which is essentially what Warren would like to reinstate.

To me, killing the banks is one of those examples where its advocates are too stupid to know that they are killing themselves as well.

Based on what you've posted,  I'd suggest more education about the financial system and its history before you call others stupid.

There's lots of room for honest debate about what the best parameters should be for a financial system that will allow a sustainable, prosperous society.  In the Keynes versus Hayek  debate, I decidedly lean towards the Hayek - Austrian school of thought but that does not mean I think Keynesians are stupid.

Similarly there can be honest debate about how much regulation of the banking system is healthy - and as in most things - either extreme is likely wrong.

[Brumby]

I fail to see how an "implementation of an idea" is not itself an idea. It's just a relatively specific one. All you're saying is that there's a cutoff to how broad or specific the idea that you patent is allowed to be.

The "implementation of an idea" means taking that idea and making it work in a practical setting.  Not post-it notes on the filing cabinet.

[cdev]

"Financial institutions" are the modern day scam artists and their financial instruments the shell game in the back of the bus.

They steal companies from entrepreneurs more often than not, and basically own governments and politicians now.

[cdev]

There is a plan to deregulate them still farther. This is one bad deal this TiSA. I smell more bailouts in the air.

Must watch video: http://www.democracynow.org/2014/6/20/a_plan_only_banksters_will_love

[Kilrah]

I can open up a shop, put 100k into it, and then issue 1000 shares at 100 bucks each.  Overnight some drug addled wallstreet bozo goes on a frenzy, and suddenly each share is "worth" 200 bucks. But i still have the same stuff, nothing changed. The extra 100k are virtual, non-existant in the real world.

That extra 100k is no different than 100k worth of the value of your house or whatever else your net worth is comprised of. [...] If it was so easy to earn huge money as you suggest, why wouldn't you do it?  You don't want to earn money?

Honestly, not that way out of thin air, no. I believe being able to make money by building totally fake value around non-existing stuff (i.e. what's called speculation) is one of the biggest problems in the world right now. The fact your house's value can change by $100k while staying identical is the whole issue.

"Proper" investment to me is have an idea, go see someone and explain it and what it can bring to who in order to get financing for looking further into it. But until you've built something that works and can be shortly/easily made available as a product, and is backed by use cases and real world numbers allowing to have something to base a realistic estimation on it is not worth anything yet.

The current trend of putting a value tag on things straight away e.g. a company sometimes even before a feasibility study for whatever they intend to make has been done yet is just so wrong - and why we get announcements like this. The initially quoted figure being based on nothing but how you've been sweet-talking whoever's interested in your project, i.e. absolutely nothing tangible it's no wonder the figure can fluctuate anywhere from zero to infinite based on the mood of people or the weather of the day (usually related )...

I can create a company with an idea and $10k, then go pitch it and 2 days later somehow it is totally OK and accepted to say that given some discussion I had my company is now worth $7M in 2 years based on some business plan that is 100% hypothetical and relies on absolutely nothing tangible as I've done absolutely nothing yet, and might not even be able to. That value will naturally vary like crazy once real-world data starts flowing in... "wow it's easier than planned, we can finish a month quicker, it's now worth 4 times more!" - "ah crap, someone came up with a competing product, divide by 10"...

If one refrained from valuing things before there is enough material (not necessarily physical of course, but also things like proof things can work as intended and there is actual interest in it) to back the estimation things would be a lot less volatile. But there are many people who like it that way because once there is a price tag on something they can further inflate it and take the difference - that is again nothing more than words. Yep I could do it - but couldn't live knowing I'm one of those.

[dannyf]

"I can create a company with an idea and $10k, then go pitch it and 2 days later somehow it is totally OK and accepted to say that given some discussion I had my company is now worth $7M in 2 years ba..."

Are you willing to bet against that?

You either over estimated your capabilities of raising money or the stupidity of your investors.

[zapta]

That is how it works.  What do you consider "the actual value of physical stuff"?  What defines the value of something?  It's whatever someone is willing to pay for it.

It case of a startup this definition is tricky because you can't sell your shares and take the cash home but investors are getting newly issued shares.