> I've heard from various secondhand sources the "fact"
>> that the majority of all that volume traded on wall
>> street is merely speculative, rather than real wealth
>> (i.e., wealth that is immediately used to build capacity,
>> buy machines, build factories, etc).
>>
>
> Technically, "100%" of the volume on the public stock exchanges is
> speculative. Companies don't use exchanges to raise capital, they use the
> existence of public markets as an indication of what people can do with
> their shares once they buy them in a initial or secondary public offering.
>
> The shares that change hands in an IPO or a Secondary offering do not trade
> on the exchange: they trade directly with the company.
Yeah... without all the secondary trading and the capital gains there would be no IPO - it's not quite as crazy from a systemic perspective as 'merely speculative'. The key divide between functional and 'merely speculative' is whether or not the trading price is a reasonable valuation of future returns to the shareowner, not whether or not money from trades flows to the firm.
Cheers, Mike Beggs scandalum.wordpress.com