As the world turns in money

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Profile Gordon Lowe
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Message 1971427 - Posted: 22 Dec 2018, 3:05:48 UTC

How much do you think the rhetoric of political leaders around the world affects the global financial system? I wonder how for instance, Trump's bluster translates into action by investors? We've seen wild volatility in the stock market, but how much of that is a reaction to real data or how much of it is just emotional response?
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Message 1971484 - Posted: 22 Dec 2018, 15:18:32 UTC - in response to Message 1971427.  

How much do you think the rhetoric of political leaders around the world affects the global financial system? I wonder how for instance, Trump's bluster translates into action by investors? We've seen wild volatility in the stock market, but how much of that is a reaction to real data or how much of it is just emotional response?

Considering the large proportion of stock market trades are by computer AI these days and operate on the millisecond level ...
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Message 1971509 - Posted: 22 Dec 2018, 17:39:59 UTC - in response to Message 1971484.  

Considering the large proportion of stock market trades are by computer AI these days and operate on the millisecond level ...

Yes, I've heard that, but there are still people on the trading floor.
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Message 1971516 - Posted: 22 Dec 2018, 18:38:55 UTC

Most people make decisions based upon emotion rather than facts, witness Trump's supporters.
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Message 1971518 - Posted: 22 Dec 2018, 18:49:54 UTC

There's a number I've always wanted to know about stock exchanges: how efficient are they?

You know the general principle: say you want to build a railroad, and make a profit from carrying passengers and freight when it's ready. You need a lot of money up front to buy land, construct running rails, construct engines, cars and trucks, and so on.

So you go to a stock exchange, sell some paperwork, promise investors a share in the profits, pocket the money, and go buy your first shovel. That's how it goes, right? I'd call that 100% efficient if all the money raised goes to the fledgling railroad company: maybe 95% if some of it goes in underwriting fees and so on.

Fast forward to now. Of all the trillions of dollars that passes over virtual stock exchange 'floors' each day in the 21st. century, how much of it goes back to the company issuing the paperwork, in the the form of fresh investment capital? That's what I call efficiency (filling the exchange's primary purpose): anyone got a number for it?

Or is it all a casino, with efficiency indistinguishable from zero? And if it's purely a casino, why do the figures matter so much?
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Message 1971519 - Posted: 22 Dec 2018, 18:59:58 UTC - in response to Message 1971518.  
Last modified: 22 Dec 2018, 19:00:35 UTC

Richard, only in an IPO does the company get money, when I buy stock on the stock exchange the company gets nothing. Another way for a company to get money is to issue bonds.
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Message 1971521 - Posted: 22 Dec 2018, 19:28:37 UTC - in response to Message 1971519.  

Richard, only in an IPO does the company get money, when I buy stock on the stock exchange the company gets nothing. Another way for a company to get money is to issue bonds.
That's the way it works now, sure. As well as the IPO, over here we also have "Rights Issues" - existing shareholders get preferential, and discounted, opportunities to buy extra new shares if the firm wants to raise additional capital for expansion (or sometimes to pay off debts...)

I'd call expansion capitalisation an efficient use of the market, but sadly passing existing shares around as trades between existing investors comes into my classification of casino trading.
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Message 1971523 - Posted: 22 Dec 2018, 19:38:43 UTC - in response to Message 1971521.  

I'd call expansion capitalisation an efficient use of the market, but sadly passing existing shares around as trades between existing investors comes into my classification of casino trading.

I agree, that is why I rely upon " the wisdom of the crowd" and do my speculating on Index funds vs individual stocks or managed mutual funds.
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Message 1971524 - Posted: 22 Dec 2018, 19:45:19 UTC - in response to Message 1971521.  

Richard, only in an IPO does the company get money, when I buy stock on the stock exchange the company gets nothing. Another way for a company to get money is to issue bonds.
That's the way it works now, sure. As well as the IPO, over here we also have "Rights Issues" - existing shareholders get preferential, and discounted, opportunities to buy extra new shares if the firm wants to raise additional capital for expansion (or sometimes to pay off debts...)

I'd call expansion capitalisation an efficient use of the market, but sadly passing existing shares around as trades between existing investors comes into my classification of casino trading.

Program trading, day trading and the like are gambling. You can still make a lot of money gambling if you know the outcome before you bet.

Widows and orphans stocks, the one that pay solid dividends, which are not sexy because of low volatility are the buy and hold stocks, not gambling.
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Message 1971525 - Posted: 22 Dec 2018, 19:53:47 UTC - in response to Message 1971524.  

Widows and orphans stocks, the one that pay solid dividends, which are not sexy because of low volatility are the buy and hold stocks, not gambling.

GE was one for many years, not so much anymore.
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Message 1971526 - Posted: 22 Dec 2018, 20:08:03 UTC

I've got some of those widows and orphans stocks, and also some bonds. But rather than rehearse well-known financial truisms, I'd still like to ask if anyone has a figure for efficiency, as I've defined it.

What proportion of Stock Exchange turnover is remitted as new working capital to the company whose name appears on the stock?

Pick any Stock Exchange you like, and average it over any time period you like.
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Message 1971536 - Posted: 22 Dec 2018, 21:09:08 UTC - in response to Message 1971526.  

Even though volume improved year over year, 2017’s 160 IPOs is the second-lowest total of the past five years and more than 100 below the 2014 high of 275 new issues. The IPO market raised $85.3 billion that year, the most in the 14 years tracked by Renaissance Capital.


https://247wallst.com/investing/2017/12/18/us-ipos-up-50-in-2017/
The New York Stock Exchange (NYSE) is an American stock exchange on Wall Street in New York City. With a market cap of more than US$16 trillion, the NYSE is the world's largest stock exchange, averaging US$169 billion in daily trading value in

https://www.google.com/search?q=How+much+money+is+traded+on+Wall+Street+daily%3F&sa=X&ved=2ahUKEwis39-sqrTfAhVxOX0KHaiVCe8Qzmd6BAgGEBE&biw=1356&bih=861
With what I quickly dug up, don't take these numbers as gospel, in 2017 the whole year's IPO were apx 1/2 of a single day's trading volume. So making hasty assumptions I would conclude apx 1/500th of the volume creates new capital.
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Message 1971538 - Posted: 22 Dec 2018, 21:18:09 UTC - in response to Message 1971536.  

Thanks - that's the sort of information I was thinking of. So, about 0.2%

Similar data is available from https://www.londonstockexchange.com/statistics/home/statistics.htm, but I haven't done the math yet.
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Message 1971539 - Posted: 22 Dec 2018, 21:21:54 UTC - in response to Message 1971538.  

I didn't do the math either I took other peoples word for it.
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Message 1971553 - Posted: 22 Dec 2018, 22:48:06 UTC

OK, from the London SE statistics linked earlier:

Turnover - Main market, average daily, all platforms, Jan-Nov 2018: £343.5 billion

Money raised - Main market, total Jan-Nov 2018:
New issues £4,973 million
Further issues £11,660 million
Total £16.6 billion

So the money raised annually is about 1/20th of the daily turnover

So the NYSE is about 10 times more efficient than the LSE - or alternatively, the Brits gamble ten times as much as the Yanks.

Draw your own conclusions...
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Message 1971560 - Posted: 22 Dec 2018, 23:32:48 UTC - in response to Message 1971553.  

One could argue the reason is there are fewer startups to eventually go public.
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Message 1971574 - Posted: 23 Dec 2018, 0:24:25 UTC - in response to Message 1971526.  

I've got some of those widows and orphans stocks, and also some bonds. But rather than rehearse well-known financial truisms, I'd still like to ask if anyone has a figure for efficiency, as I've defined it.

What proportion of Stock Exchange turnover is remitted as new working capital to the company whose name appears on the stock?

Pick any Stock Exchange you like, and average it over any time period you like.

ZERO! IPO's don't trade on the exchange, they are sold direct. Very very few can buy an IPO, if you do instead of your check being made out to a brokerage house, it is made out to the company. Broker houses buy essentially all the shares in an IPO, and then resell - er exchange, them to the public.

Or put it this way if you are buying capital stock from the company it likely is as a vulture capitalist and the stock isn't registered and can't be traded. At some future date it might be registered and then you can trade it. And this applies to IPO's of the big ones too, the real IPO is about a couple of weeks before trading on the exchange begins, the difference being they are assured of being qualified and listed and the exchange may even begin trading (wi) When Issued.
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Message 1971585 - Posted: 23 Dec 2018, 1:34:28 UTC - in response to Message 1971574.  
Last modified: 23 Dec 2018, 1:47:42 UTC

Interesting point of order
edit, I would guess what I found was the first resale of IPOs.
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Message 1971602 - Posted: 23 Dec 2018, 2:37:09 UTC

Other than good will toward investors in the face of the asbestos and talcum powder verdict, why would Johnson & Johnson offer a 5 billion dollar buyback of shares of it's stock?
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Message 1971622 - Posted: 23 Dec 2018, 4:06:51 UTC

It's just legalised gambling and with mostly other people's $'s these days.
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Message boards : Politics : As the world turns in money


 
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