[madsbuch]

> Apparently they can by giving it to the right entity at the right time.

I want to understand this. If I buy a Novo Nordisk share on the market I never gave novo nordisk a single krone. My counter part is the seller (who rarely would be the company itself).

Generally I would say that investors provide liquidity to the market. Ie. the action of buying and selling are the ones that provide the value. Not holding.

You can conclude that a person holding onto a share for 30 years did not provide any value. That person was merely a rent seeker based on other people providing value by doing the asset allocation – In Denmark these people would be punished by the progressive capital gains tax, while the people trading ones in a while would benefit from a lower tax bill.

Or am I wrong?

[sokoloff]

If I give Novo directly $125 for a share of their stock, sell it 30 seconds later to you, who gives me $125.01, and you hold those shares for 30 years, which one of us really invested in Novo? Does your opinion change if we've agreed the night before that you'll buy the share from me?

I believe the long-term holders of equity investment are the true investors, regardless of whether they bought the shares in an initial offering or a secondary offering.

The initial offering market doesn't exist without the secondary market.

[madsbuch]

I am talking about the value you provide as an investor - regardless of where you got the share. I agree that it is indifferent whether you buy it from the company (in an IPO or in later emissions) or on the secondary market.

My point is that the value provide is liquidity. Ie. the property that owners of a stock con transfer that stock into money to use on other ventures. People that merely hold a stock does not provide liquidity. You need to have an open order on your stock to do that.

Now, please oppose me! My question is: What value to does term holder provide in virtue of them being long term holders?

[mlrtime]

All of your questions can easily be understood by a few minutes of investopedia. Start by reading about "Capital Markets" and then risk transfer.

You start the thread saying what people ought to do with their money and presumably having it forcefully taken with little understanding of financial markets. This is [one reason] why nobody takes these suggestions seriously about personally wealth.

[madsbuch]

> All of your questions can easily be understood ...

Then you should be able to make a well informed comment on the matter, as you clearly understand it.

> This is [one reason] why nobody takes these suggestions seriously about personally wealth.

What suggestions? Capital gains tax? I only know of very few industrialised countries not enforcing capital gains tax. So that idea is most certainly taken serious.

> You start the thread saying what people ought to do with their money and presumably having it forcefully taken with little understanding of financial markets.

Can you expand on this? Having money "forcefully taken" is a core feature of modern efficient markets whether you like it or not.

[sokoloff]

They have (transitively) provided the company the original $125 to use in their operations.

In that example, you provided the money; I was just a middle-man.

Except as it pertains to employee/executive comp and future fund-raising, the company doesn't care about the secondary market liquidity. They care about the money they used over that 30 years to grow.

[madsbuch]

> They have (transitively) provided the company the original $125 to use in their operations.

But that value already existed as an intrinsic property of the company (eg. NAV). What the market did was to unlock these money for the company to use - Ie. they provided liquidity.

Example: I have a company that is worth $1000, but I need to spend $200 in R&D. I sell 20% of the company in the market for 200$. No value way produced, but the market transformed my 200$ from company to money - ie. liquidity.

Value that only happens when people trade, and not when people hold. So back to my initial point: Long term investors does not provide value.

[sokoloff]

> I have a company that is worth $1000 / that value already existed as an intrinsic property of the company (eg. NAV)

Upon what is this based in a world where no long-term investors exist?

Even in the "DCF of dividends plus NPV of terminal enterprise value" model, the last is dependent on long-term investors. (For the high number of tech and high-growth companies who pay no dividends, the first term in the valuation is $0.)

[6510]

> I want to understand this.

I certainly don't understand but there is no need. The mechanism (provided it is legal) isn't really important.

We need work, to earn enough to survive and have some quality of life. It must feel like you've contributed something useful and society rewarded you reasonably for it. Others will have to do work for you or it wont work. If there is no money for that it cant work.

I think 100 years before things get truly silly.