| You may not see this comment - coming so late as it is. Maybe I am just thinking aloud to myself, but this may communicate better than my other response. There are two ways of increasing value of a money machine. It can make more money (sales, rents, etc.), or you can convince people the machine is in a trendy category (AI startup!). While in the short run, the way you market the money machine (stock) can have huge impact. In the long run its worth will come from how much money the machine actually prints. People will never keep paying a higher and higher price for a stock just because you keep slapping on better logos and giving the company better stories. It might take a while, but any value growth due to externals hits a limit. And anything overvalued that has a limit will fall back inline with competing products. I.e. a mean price/earning ratio. That kind of "value growth" doesn't compound, and the entire point of stocks is to compound value. Alternatively, actually growing the business does compound. The more sales, the more resources to add employees, create more products, pay for more marketing (of actual products), etc. There is no ceiling at all. That doesn't mean people don't play games with valuation, or that you can't make money off of assets getting temporarily over valued at the right time. But it does mean the economy won't get more valued due to these games, as someone will lose every dollar that was won through gaming the market. Every unearned increase in stock price now reduces the return for someone else buying the stock after that increase. When people realize earnings are not really growing commensurate with stock prices for a whole class of stocks, we get worse than just lost future earnings, we get a crash. In the end the games do decrease growth of stock prices total, even though some investors will come out ahead for all the gaming. |