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Comment by jboog | Hacker News Reader

Ben Graham said many decades ago that over the short term the market is like a voting machine but over the long term it's a weighing machine.

There have always been periods of irrationality in the markets but there's no reason to believe that equities are fundamentally untethered from their inherent value in perpetuity.

Eventually most of the overnight WSB stock picking geniuses are all going to lose their shirts and we'll see less of this GME nonsense. They make up a tiny fraction of trading volume anyway.

It happened in '07-08, late 90s dot-com bubble and about every decade or so before that for different reasons

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>but there's no reason to believe that equities are fundamentally untethered from their inherent value in perpetuity.

Yes, but human lives are finite. Of course the current market is mostly a ponzi, but what if it lasts yet another decade? That's a major fraction of anyone's lifespan.

Fundamentally the ponzi started to collapse in 2007/2008, but it was bailed out by the government. Increasingly it looks like the only way the ponzi can actually collapse is by dollar inflating, everyone getting poorer and ponzi games collapsing in real terms, but not nominal terms. Unfortunately, probably the best thing to do in the meantime is to try to win at ponzi games and try to leave others with bags.

I like that Graham quote, and you make good points. I guess when I say "investing," I mean more like - Purchasing an equity entitles you to a share of that business' income and potentially assets, but if you buy the equity on the stock market, you're not actually investing in capacity, the way you would be if you bought an IPO or even just a piece of equipment you could use to make something.

And I think people have always given the stock market more credit than it's due as being "the economy," when really the stock market is a set of signals about the economy. The economy is the people and machines and the buildings that do stuff and make things, and the economy remains regardless of what's happening in the stock market.

If a bunch of silliness happens around a certain stock, or if the stock market becomes wildly detached from reality, it doesn't have anything to do with peoples' ability to produce value.

> you're not actually investing in capacity, the way you would be if you bought an IPO or even just a piece of equipment you could use to make something.

while you are not directly investing in capacity like you might in an IPO, purchasing stock does create the same outcome. It's just not _you_ who is doing the capacity investing directly, but someone else who does so, as a result of the chain of investments.

It doesn't necessarily though. When I buy an IPO, my dollars go straight (kind of) into a company's bank account. When I buy stock on the market, my dollars go to whoever I bought the stock from, who will probably use those dollars to buy more stock. The only time a company ever receives dollars it can use is when it sells stock to the public or gets a loan, and the vast, vast majority of transactions on the stock market do not involve dollars going to anyone who will use them to invest in capacity.

> vast majority of transactions on the stock market do not involve dollars going to anyone who will use them to invest in capacity.

If you could _only_ invest directly into capacity, the amount of dollars that people would be willing to put in would be much smaller than today's. That's because the risk profile is singular in direct capacity investment.

The reason the stock market can fund IPOs is because it allows the different stratas of risk to be separated, and taken on by different parties that want those risks. So without your dollar buying an existing stock, thus letting early investors for an IPO an exit, they would unlikely to want to invest in the IPO in the first place!

Yeah, it's certainly true that the financialization of everything allows for a lot more of every type of investment to be made (including in productive capacity).

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