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markinspain

Are All Shares Utterly Worthless In Reality?

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Philosophical thoughts.

If a company like Northern Rock can go from a supposed value of £12.00 to less than £3.00 in 6 months, what does that say about shares in general? What would happen if suddenly everyone said I don't want to buy these virtual digits anymore?

Would people want to buy objects instead and so return us to a barter system?

Discuss.

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Philosophical thoughts.

If a company like Northern Rock can go from a supposed value of £12.00 to less than £3.00 in 6 months, what does that say about shares in general? What would happen if suddenly everyone said I don't want to buy these virtual digits anymore?

Would people want to buy objects instead and so return us to a barter system?

Discuss.

Oh dear, oh dear no.

Very simplistically it works like this. Lets consider a manufacturer of mp3 players (to choose something flying off the shelves)

This company has assets, lets say buildings ( $X million, cash and bank deposits $Y million, its intellectual property $Z million) If you add this up, lets say it comes to $1 Billion. This is its 'book value' ie: if it was all sold off then it would generate a bit less than one billion.

If that company has issued 10 million shares, each share would be worth $100 each. Companies are worth more than their book value of course, because once you buy a share you share in the future profits of that company.

So if the price of shares drops below the 'book value' or the 'net asset value' or whatever, that company is cheap and the person with a share in their hand is pretty sure to get their money back.

The problem is, if the company has borrowed $2Bn, then it might well be bankrupt. In that case the shares may well be worth 0. You need to tot up a lot of values to see if the company is worth the share price.

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If the market price of a company falls below the value of the company's assets, and there is no future growth projected, then the directors should sell the company assets and distribute this to the share holders. As long as the company has assets (buildings, computers etc) it is worth something.

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Would people want to buy objects instead and so return us to a barter system?

Discuss.

i'm thinking about stacking up on drink and tabaco to trade with and pushing me down this road is knowing that these are going up as goverment desperate for cash put more tax on these products.

life would be much easyer if i got myself a under and over shotgun to take along when i'm bartering

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Oh dear, oh dear no.

Very simplistically it works like this. Lets consider a manufacturer of mp3 players (to choose something flying off the shelves)

This company has assets, lets say buildings ( $X million, cash and bank deposits $Y million, its intellectual property $Z million) If you add this up, lets say it comes to $1 Billion. This is its 'book value' ie: if it was all sold off then it would generate a bit less than one billion.

If that company has issued 10 million shares, each share would be worth $100 each. Companies are worth more than their book value of course, because once you buy a share you share in the future profits of that company.

So if the price of shares drops below the 'book value' or the 'net asset value' or whatever, that company is cheap and the person with a share in their hand is pretty sure to get their money back.

The problem is, if the company has borrowed $2Bn, then it might well be bankrupt. In that case the shares may well be worth 0. You need to tot up a lot of values to see if the company is worth the share price.

OK but my point is that your X,Y and Z supposed value is a matter of opinion. The company may think that it´s X,Y and Z is worth so much, but surely this is only true if it could find someone to buy it for this much, in much the same way as a value of a house is dependent on what someone is prepared to pay.

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Mods - please get this retarded thread, and others like it, off the main forum.

Nah. The man is quite correct in his analysis. Shares and paper money is completely worthless. There is just one additional factor that makes them worthwhile and that is the gun in the room.

The pound is backed by the taxman's ability to frighten and steal from people. The stockmarket is built on the back of non possesor ownership, a physical impossibility in fact, but made workable because it's again backed by government coercion.

Using economic analysis on the current system is a bit tricky to unless you take into account that large amounts of resources are herded around the economy at gunpoint.

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