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This is an interesting premise when applied to the stock market. In theory, the value of a stock is the discounted value of all future cash flows, on the premise that all profits (in excess of debt servicing etc.) belong to the shareholders, and they have a legal claim on that cash. In practice, have you ever known a company who, at the top of their product cycle, says "Welp, we got no idea what we could possibly spend all this money on that has a positive ROI in excess of what you could get elsewhere in the market, so here's your dividend, we'll keep raking in the cash for you as long people want to buy our products, and then we'll liquidate and return the cash to our equity holders"? Usually the death throes of a company involve them hiring a series of excessively overpriced turnaround CEOs, firing them with multi-million-$ severance packages, acquiring promising startups for lots of equity which they end up killing, and paying a large and disengaged workforce to search for other jobs. They do eventually trade down to zero eventually, which proves your point, but the conclusion one could draw is that every individual stock is actually an asset bubble. They rarely, if ever, end up returning the company's profits to shareholders, but shareholders who exit when it looks like there will be a lot of profits in the future can make a lot of money at the expense of the shareholders they sell to. |