That’s an awful lot of verbiage that really just means you think the difference is that the expected future profits, which justify the valuation, make the difference between a company that will succeed and one that won’t. I guess you think phrasing it in terms of future cash flows makes it easier to swallow that "the sole source of returns paid to investors is money coming from more recent investors" applies only to companies which will not give a future return. But honestly its a big stretch however you word it.lpm wrote: ↑Sat Nov 26, 2022 9:43 amSorry Bewildered, but that's just a lengthy post proving my earlier assertion: [owning shares is] so commonplace it feels like the natural ordering of the financial world.
An early investor in Tesla who takes profit after the company has only made heavy losses is not getting their money from new investors. (Except in the irrelevant trivial sense of where the money transfer comes from.) That early investor is actually extracting profit out of the future.
This is because money has its weird time shifting power.
It is commonplace to pay money now in return for a future stream of money back. Or the reverse, the UK government issued Napoleonic War bonds with no maturity date, converting cash flows stretching into the infinite future into upfront cash.
An investor in a Tesla share is buying a share of Tesla's net cash flows to infinity (colloquially future profits but really future cash flow). That estimate of the future is obviously where the challenge lies. But it is a freaky thing where cash from the future arrives into today's reality. This isn't unique to humans: animals and plants can foresee the future and gain real world benefit today from events that will happen in the future.
If an early Tesla investor buys at $1 and sells for $100, that profit is not coming from later investors. The profit is coming out of the future and into today's reality. Sure, the mechanical money comes from new investors in the pedantic sense, but the $99 profit does not. The expected discounted future cash flows have risen by 100x so the profit flows accordingly.
Now do it for Bitcoin. It's an easy calculation. Somebody buying at $1 is getting a share of all future returns to bitcoin holders, which is zero. When they sell at $15,000 the future returns to bitcoin holders is unchanged at zero. The entirety of the profit has come from new investors, nothing had come out of the future.
And what of over excited speculation, the South Sea Bubble and the like? A share in Unilver is dull and boring, so gains and losses are mostly from the future with a bit of stock market froth and pessimism. A share in Tesla is a bit meme stockish, with over excitable fan boys pushing the price up, allowing for early investors to take profit at the expense of naive later investors as well as from future higher cash flows. Gamestop was even more do, with most of the profit to early investors coming from later speculators. Pump and dump takes it into fraud territory, with future cash flows deliberately misrepresented. And crypto takes it into Ponzi territory, with there being zero future cash flows and 100% of profits must come from speculation as there's no other route.
It's a spectrum, from boring Unilever type stocks, to more speculative like Tesla, all the way through to zero future cash flow "investments" like Scrut Coins. It's the ebb and flow of expected future cash flows that makes speculative share investments like Tesla very different to speculative zero future cash flow products like bitcoin.
You didn’t try to tackle the difference between a company whose value goes to zero due to problems that cannot be foreseen with that long reply. I assume the argument would be there is an expectation value based on the information we have today which distinguishes them though I don’t know how you’ll phrase that with your future cash flows way of discussing it.
Anyway I think accusations of fraud and being a Ponzi scheme based on this won’t stand up. You could try it in court and see if you can get someone sent down for it if you were right.