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I know the whole market economics of worth more, and supply/demand, etc. But how do they physically gain value? For example, assume a basic example that in our world, we have a total of 100$ of liquid cash at hand, that is physical, existent money. I now have 1 stock worth a penny. Doesn't seem too bad. But when the stock price goes up, where does the money come from to pay the difference? When it's under a hundred dollars, you could claim from the physical assets, but what about when it goes beyond that price.

Another example, assuming the same constraints as above, i issue 1000 shares at a penny each, that's 10 dollars. If each share goes up by 50% that's 15$ total, which is still fine. But let's just assume the value goes to 11$ a share, where the fuck does the money come from to payout the dividends or price of the shares? There isn't enough physical money for the payout anywhere. I know the federal reserve runs cover a lot of times for this bullshit, but there just doesnt seem to be a long term solution to the stock roulette

I know the whole market economics of worth more, and supply/demand, etc. But how do they physically gain value? For example, assume a basic example that in our world, we have a total of 100$ of liquid cash at hand, that is physical, existent money. I now have 1 stock worth a penny. Doesn't seem too bad. But when the stock price goes up, where does the money come from to pay the difference? When it's under a hundred dollars, you could claim from the physical assets, but what about when it goes beyond that price. Another example, assuming the same constraints as above, i issue 1000 shares at a penny each, that's 10 dollars. If each share goes up by 50% that's 15$ total, which is still fine. But let's just assume the value goes to 11$ a share, where the fuck does the money come from to payout the dividends or price of the shares? There isn't enough physical money for the payout anywhere. I know the federal reserve runs cover a lot of times for this bullshit, but there just doesnt seem to be a long term solution to the stock roulette

(post is archived)

[–] • 0 pt

This is a common confusion when people don't understand how reserve banking works. Long story short, the money doesn't exist.

Say you have $100 and put it in the bank. You have a balance of $100. The bank has to keep 10% in reserve, but they can lend the rest. So they lend $90 to Frank. Now Frank has $90 and you still have $100. Total money = $190. Rinse, lather, and repeat until you have a giant house of cards built upon fake money.

[–] • 0 pt (edited )

Price fluctuates because someone wants to sell at a price, and someone wants to buy at a price.

If you issue shares at $0.01, and your company is doing well and making a good profit and paying out a portion of those profits as a dividend, then people will generally want those shares of your company and will ask more for them during a sale. If someone is willing to pay that, that's the new price. If your company is doing poorly, people are willing to pay less for the shares and the price will generally adjust to that lower value if there are sellers willing to sell. If there are no or few shares for sale then the price may not change a whole lot, if at all.

The company generally has no say in the matter, and doesn't receive or broker any of the sales. That's what the brokerage firm does.

Dividends are just a portion of the profit returned to those shareholders. No profit, no dividend unless you're trying to maintain a payout streak at the risk of insolvency.

This is way over simplified, but it's essentially someone wants to sell, someone wants to buy, and they settle on a price.

[–] • 1 pt

I understand that part, where i draw a blank is the physical conversion of resources when the sell price outpaces the total value of resources in that nation. Gamestop is a great example of how wrong it can go, but im just surprised the only solution we have to now is the capital gains tax and early withdrawal fee

[–] • 1 pt

There really isn't any "money" as in gold/silver/tangibles to cover this stuff, it's all because the government(s) say their fiat is worth something.

It's all just theoretical money until it's cashed in. If all shareholders tried to cash in at once, the price would crash because of a market glut and lack of buyers.

[–] • 0 pt

Lol. Maybe 10 years ago. Now it's all about money flows and popularity. Money flows over there, prices go up over there.

Right now the money is flowing to stocks. So stocks go up. Profits have been decreasing for 5 years so the old model is obsolete.

[–] • 0 pt

It's fairly simple really.

Somebody believes that a specific item has value. Look at art, dogecoin, gold etc.

Somebody believes, that at some time in the future, somebody else will believe that that same item will be worth more than what the original purchaser paid for it.

People their purchases.

[–] [deleted] • 0 pt

You ask two questions: how does a company’s stock price increase and where does the money come from to pay dividend. Both have different answers.

Before answering, though, you have to understand what stock is. Let’s say you have a company, Apple, that makes computers. The people that started apple own all of it, and any profits they make are owned wholly by them. Let’s say they want to raise money so they can build more stuff - at the end of the day, using that money to build more stuff then they can on their own will net them more money at the end of the day, so they take a chunk of their company and offer it to the public - an IPO. The value of the company is calculated based on multiple things - how much do they make, what assets do they have, etc. then they take …say 20%, and offer it as stock. They will offer 1,000,000 shares at what the company is worth. For this example, let’s just say $10 per share. That’s an influx of $10M for a $50M company.

2 years later, the Apple releases the iPhone. All of the sudden, they are making 50x more then they are initially, so people want that stock. They’re now willing to pay $50 per share because Apple is selling a billion iPhones each year and their profits are through the roof. Folks want a part of that and think Apple will continue producing really cool shit. If they do, the stock price will be with $100 per share if 5 years.

So that’s how that works - a purchase of stock is a purchase of a part of a company, and one buys stock that they think will increase in value based on good leadership, good products, etc.

Dividends.

Dividends are profit sharing for investors. Rather than luring investors with rising stock price (amazon), more established companies (GE) will take a portion of the profits they make, and give them back to investors. This is opposed to reinvesting in the company itself with the assumption that it is already a well oiled machine. So Apple gives back $2 for each share you own. That means they’re giving back $2M per year. If somebody owns 1,000 share, they’re getting back 2,000 per year based on a $10,000 investment. Not a bad deal considering the value of their investment is also rising.

[–] • 0 pt

You haven't even scratched the surface of fuckery in the stock market.

Wait til you learn about naked shorts, payment for order flow, dark pools, and synthetic shares.

[–] • 0 pt

Its been a very long time since the "money" that is existing, could actually be covered by physical tender.

Banks would go into default, and push the burden to the federal gov, who would print the money, or default.