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The Ponzi Factor | Stocks are NOT Ownership Instruments

2m read
·Nov 3, 2024

The reason why finance professionals do not see the stock market as a Ponzi scheme is because they believe the credibility for an idea rests on repetition, tradition, and people who recite it rather than proof, logic, or facts.

The first fallacy, which I believe is the most fundamental falsehood that leads to other false ideas, is the notion that stocks are equity instruments that represent ownership. Finance professionals will argue the stock market can't be a Ponzi scheme because the value of a stock represents value in a company, and ownership instruments are being exchanged in the transactions.

But there's practically no truth to this idea because the value of a stock has no legitimacy. It is just an arbitrary number derived from a Ponzi exchange process, and the value is not backed by anything. A share of Google can trade around nine hundred dollars, but Google explicitly states in writing that the par value of their stock is only 0.001 cent.

Google also says they do not pay their investors any dividends, and their Class C shareholders have no voting rights. So if you own a share of Google, you won't receive any money from Google's business activities, you won't be allowed to vote on any corporate issues, and Google isn't obligated to pay you anything more than 0.001 cent for that share you bought for nine hundred dollars.

Does that really sound like a legitimate ownership instrument? If I mail you a chair that was missing three legs, the seat cushion, and the backrest, whatever I sent you, can I really call it a chair? For a value to have legitimacy, there must be someone or something in place to back that value.

The value of the dollar is backed by the United States government; the value of a house is backed by the intrinsic physical value of the house itself. But the value of stocks is not legitimately backed by anyone or anything. The idea that today's common stock represents the real intrinsic value of a company is a baseless and unproven idea, and if people are selling such an idea to make money, then it is also a fraudulent idea.

When you’re pre-product market fit, sales is a job for the founders.
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