yego.me
💡 Stop wasting time. Read Youtube instead of watch. Download Chrome Extension

The Ponzi Factor - Short Trailer


2m read
·Nov 3, 2024

When we think about the stock market, we think about money, the finance industry, businesses, and making money from investing in successful businesses. The belief is investing in successful businesses is what leads to investment profits, and there's a direct connection between the success of the underlying company and the profits investors experience. This is a reasonable idea, which is why it's in textbooks and recited by finance professionals who sell stocks and stock-related services.

However, this is not how stocks actually work. Most finance professionals have no idea where profits from stocks come from; they just assume it gets magically generated from the complexities of the market. The myth is profits from stocks are generated from the earnings and growth of the underlying companies, and when a company makes money, they share the profits with their investors.

But in practice, most public companies never pay dividends on their stocks, and when they make money—which can be millions or even billions—they keep everything. The reality is profits from stocks come from other investors who are buying and selling stocks. When an investor buys a stock for ten dollars and sells it for eleven dollars, then eleven dollars comes from another investor, someone who will then start hunting for yet another investor who will give him twelve dollars, and so on.

This is technically a negative-sum scenario for investors because they are contributing all the money, and there are fees attached to every transaction. The company that issued the stock isn't involved in these transactions, so whether the business is making or losing money is irrelevant.

This is why companies like Tesla Motors, which has lost billions since they became a public company, can still have stocks that appreciate in value. But in a situation where investors' profits are strictly dependent on money from other investors, investors can make or lose money regardless of whether the company they invested in is making or losing money.

In reality, the stock market is a massive system that shuffles money between investors. It is a system where current investors' profits are directly dependent on the inflow of money from new investors, and such a system is also known as a Ponzi scheme.

More Articles

View All
The Housing Market JUST Went From BAD To WORSE
What’s up, Graham? It’s guys here! So, while the stock market was sneaking towards its record all-time high, Dogecoin was blowing past 40 cents, and Apple was unveiling a purple iPhone that sent their stock price soaring a whopping .0038 percent. There w…
Saving the Creepy Crawlies Release | Podcast | Overheard at National Geographic
Well, the first couple of months of the lockdown, I was just kind of bummed out. It was like March, April; I wasn’t sleeping that well. You know, there’s so many places I need to go and couldn’t go anywhere. This is National Geographic photographer Joel S…
My morning routine
So I’ve really avoided making a morning routine video, specifically because I feel like there’s just so many of them on YouTube, and I feel like morning routines are generally overrated. You know, everyone’s seen thumbnails on YouTube of like, “The One Mo…
SPACE STRAW
Hey, Vsauce. Michael here. Our atmosphere is a thin veil of air, held to earth’s surface by gravity. We live in it, we breathe it, we walk through it every day; it contains all weather, but yet it is almost nothing. In fact, if the earth was the size of a…
How he made $100,000 his first year as a Real Estate Agent
What’s up you guys? It’s Graham here. So I’m actually all the way in London, Ontario for the next week visiting family, and I got linked up with Jeff. Why vote here? And Jeff and I actually go back pretty far. Almost like, yeah, it’s been good. It’s been …
Why I Don’t Feel Guilty for Busting Wildlife Traffickers | Nat Geo Live
(Onkuri speaks) Government agencies in many parts of the world either don’t know much about the problem of wildlife trafficking or they might be understaffed, they might be under-trained, they might be under-equipped. So, we go in to help them and supple…