Re:The Crash of ’87, from the Wall Street Players Who Lived It
by lmm on Tuesday October 17, 2017 @07:51AM
(#15490178)
> If I want an investor to purchase 20% of my company. For 20% profit, why should any sort of bonds, currency devaluation come into fact.
You'd have to find an investor who wanted to purchase 20% of your company, which is quite a big ask in a lot of respects: they'd be very heavily exposed to one single company, their risk requirements would have to align exactly with yours, they would have to be using the same currency as you. Bottom line is, you'd get a pretty poor price - which is why the institutions that end up buying 20% of companies are the big banks who can slice that exposure and find buyers for the different pieces. (Just like if you're trying to source a given component for manufacturing, you may well end up going through a broker and an importer rather than dealing directly with whoever makes that component). If the banks weren't able to give a better price, no-one would sell through them.
> What the value of my countries dollar happens, has no effect on the percentile of my company.
Sure, but if I'm a Japanese pension fund and the value of my investment drops by 5% because the dollar has weakened against the yen, my investors are going to ask me some awkward questions.
> At what point is it not about the investment about the business, and gambling about how it will go in the future(eg shorting).
It is investment: no-one's doing this for fun (well, maybe a few people are, but they're only hurting themselves if so), they're doing it to make money, which means figuring out what's actually valuable. At the end of the day the only money going into the system is business profits, so the only way to make money is to do something that makes more money for the economy (or, sure, you can do zero-sum bets - but that's not a profitable business to be in in the long term).
> That and the whole system akin to it, is the part that is making me wonder how it was ever allowed.
There's no "allow"; it's a free country, you can buy and sell stuff you own. But the reason the markets are active is because they're productive.
You'd have to find an investor who wanted to purchase 20% of your company, which is quite a big ask in a lot of respects: they'd be very heavily exposed to one single company, their risk requirements would have to align exactly with yours, they would have to be using the same currency as you. Bottom line is, you'd get a pretty poor price - which is why the institutions that end up buying 20% of companies are the big banks who can slice that exposure and find buyers for the different pieces. (Just like if you're trying to source a given component for manufacturing, you may well end up going through a broker and an importer rather than dealing directly with whoever makes that component). If the banks weren't able to give a better price, no-one would sell through them.
> What the value of my countries dollar happens, has no effect on the percentile of my company.
Sure, but if I'm a Japanese pension fund and the value of my investment drops by 5% because the dollar has weakened against the yen, my investors are going to ask me some awkward questions.
> At what point is it not about the investment about the business, and gambling about how it will go in the future(eg shorting).
It is investment: no-one's doing this for fun (well, maybe a few people are, but they're only hurting themselves if so), they're doing it to make money, which means figuring out what's actually valuable. At the end of the day the only money going into the system is business profits, so the only way to make money is to do something that makes more money for the economy (or, sure, you can do zero-sum bets - but that's not a profitable business to be in in the long term).
> That and the whole system akin to it, is the part that is making me wonder how it was ever allowed.
There's no "allow"; it's a free country, you can buy and sell stuff you own. But the reason the markets are active is because they're productive.