nz shares or property

[fungus pudding]

Economic activity producing income is usually taxable. A shareholding providing equity in a business engaged in economic activity is a productive investment as without the equity the business would not function.

Which of course applies only to the original share or initial offering. After that it's just a matter of swapping a bunch of scrip for a bunch of money. The many millions of dollars which will be transacted today will not affect economic activity or productivity to any great degree.

[dobby41]

Which of course applies only to the original share or initial offering. After that it's just a matter of swapping a bunch of scrip for a bunch of money. The many millions of dollars which will be transacted today will not affect economic activity or productivity to any great degree.

Which was my point.
Yet people keep saying that rental housing is not productive (in that people should get out of rentals and put their money in the productive economy) and imply that the stock market is part of the productive economy.
You could argue that rental properties provide more economic activity (maintenance etc) than shares (keep in the bottom drawer).

[Bjauck]

Which of course applies only to the original share or initial offering. After that it's just a matter of swapping a bunch of scrip for a bunch of money. The many millions of dollars which will be transacted today will not affect economic activity or productivity to any great degree.

The way I see it is that it is the workforce and the improvement to the land, and the ability to produce goods and services therefrom, that is the productive part of the investment. Whether that is the purchase of a rental property providing an accommodation service or shares in a company.

[Bjauck]

The way I see it is that it is the workforce and the improvement to the land, and the ability to produce goods and services therefrom, that is the productive part of the investment. Whether that is the purchase of a rental property providing an accommodation service or shares in a company.

Just to clarify my previous post...The purchase of shares (in an already established business) is still a productive investment.

However the person, who sold the shares, may decide to invest their proceeds in a non-productive or less-productive investment. For example they may subsequently invest the proceeds in a bach/crib or an expensive section to landbank.

[fungus pudding]

Just to clarify my previous post...The purchase of shares (in an already established business) is still a productive investment.

However the person, who sold the shares, may decide to invest their proceeds in a non-productive or less-productive investment. For example they may subsequently invest the proceeds in a bach/crib or an expensive section to landbank.

It's hardly a productive investment if the ownership of the shares simply goes to a new owner. It is the original purchaser, whose funds go to the company, that makes the productive investment. What the vendor of the shares does with his freed up capital is hardly relevant to the original deal; although if he chooses another IPO then it could be considered productive.

[Bjauck]

It's hardly a productive investment if the ownership of the shares simply goes to a new owner. It is the original purchaser, whose funds go to the company, that makes the productive investment. What the vendor of the shares does with his freed up capital is hardly relevant to the original deal; although if he chooses another IPO then it could be considered productive.

I guess the original purchaser or investor in a business could always seek a voluntary liquidation or destruction of the business when they want their funds back - instead of selling to a new investor or shareholder.

[fungus pudding]

I guess the original purchaser or investor in a business could always seek a voluntary liquidation or destruction of the business when they want their funds back - instead of selling to a new investor or shareholder.

What a spectacularly brilliant idea.

[mfd]

Without a liquid share market, it would cost companies more to raise capital and people would be less likely to start them. Would you prefer to invest money in a company where you will be able to quickly, easily and cheaply sell your stake at a later date, or one that you will struggle to offload?

When we buy shares we contribute liquidity to the share market and this makes it a tiny bit more rewarding for people to start businesses, and a tiny bit easier and cheaper for existing companies to invest in making themselves more productive. This effect is obviously more direct when we participate in capital raisings, but every little bit helps.

Buying an existing house has no such positive externality and only serves to drive up the price of something we all need.

[Bjauck]

What a spectacularly brilliant idea.

It is just as well as there are still people around who don't put their money into real estate and instead buy shares in companies in business, so the business does not need to be liquidated when the foundation shareholders want to end their involvement.

[fungus pudding]

It is just as well as there are still people around who don't put their money into real estate and instead buy shares in companies in business, so the business does not need to be liquidated when the foundation shareholders want to end their involvement.

Equally, and just as silly - 'It's just as well there are people around who don't put their money into shares and instead buy real estate, so the building does not have to be dismantled and the materials returned for a credit when the original developers wants to end their involvement.'