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View Diary: Senator wants to use gambling laws to regulate Wall Street (211 comments)

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  •  Details... (1+ / 0-)
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    phonegery

    Google probably doesn't need to issue more stock at present.  But a number of companies go through rounds of stock offerings for a number of reasons, the most common of which is (or at least used to be) to pull in new capital funds for improvement projects.

    The difference between purchasing a new stock offering and a "resale" offering is that by purchasing the new stock, you are actually contributing to the company itself.  Whether or not you're gambling with your purchase isn't really what's important, IMHO.  What's important is that your investment directly affects the health of the company and the economy.  So under my scheme, holding an initial stock offering and profiting from it should be given preferential treatment.  At present, it is almost impossible to get 1-10 shares of an IPO stock anyway - the institutional investors suck them up and spit them out shortly afterward, having made an obscene amount of profit in one to two days.  (This brings up a corollary - that the IPO shares must be held for a minimum period of time in order to "vest" into the advantageous rate...)

    When you buy stock on resale, you're not really investing in the company - you're investing in a derivative of that company: whether or not the stock will do well based on the company's actions.  Dividends - the return on the initial investment - would in my ideal world also gain the beneficial tax rate.

    The combination would probably lock up the stock market for a while, but it would return some sanity to stock values, and it would make the market a more positive (and stable) part of our economy.

    Necessity is the plea for every infringement of human freedom. It is the argument of tyrants; it is the creed of slaves. - William Pitt

    by Phoenix Rising on Mon Nov 30, 2009 at 06:27:22 PM PST

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    •  I don't quite buy (hehe) this one: (1+ / 0-)
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      ColoTim

      When you buy stock on resale, you're not really investing in the company - you're investing in a derivative of that company: whether or not the stock will do well based on the company's actions.

      That's technically true, but if there weren't a resale market for stock then nobody would buy newly-issued stock except to get dividends, and that would restrict them to either "super safe" investments (e.g. traditional utilities where the ROI is low, but essentially guaranteed) or "super speculative" ones (where the required ROI is so high that the offering company would be under enormous pressure to cheat). You'd be encouraging both excessive risk-taking and inadequate risk-taking and discouraging moderate risk-taking.

      There is nothing so practical as a good theory—Kurt Lewin

      by ebohlman on Mon Nov 30, 2009 at 11:35:58 PM PST

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      •  This is a problem how? (0+ / 0-)

        I'm not proposing we tax "resale" dividends at 100% - just at full personal tax rates.

        And the whole point is that gambling on the stock market shouldn't be anything for which we give preferential treatment.  Capital gains tax rates are supposed to help encourage capital investment; stock resale does nothing toward that end - why give it the credit?

        Necessity is the plea for every infringement of human freedom. It is the argument of tyrants; it is the creed of slaves. - William Pitt

        by Phoenix Rising on Wed Dec 02, 2009 at 09:33:25 PM PST

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