It feels morally wrong to invest in a capitalist company but can someone explain to a dumb idiot (me) how it actually is
A couple of thoughts I have on this:
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Profit from buying and selling stocks comes from the exchange value of the trade, and not the surplus value that's extracted from workers. As @GrandAyatollaLenin already pointed out, only dividends would come from company profits, but as a small investor it's very unlikely you'd make any money from dividends anyway.
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Aside from this, I'm not sure there's a solid case that participation in the current unethical system is always itself unethical, and it's very similar to the "you call yourself a socialist, yet you use an iphone" argument. You most likely already give money to unethical companies by purchasing their products, and you almost certainly give money to unethical governments through paying taxes. It's all unethical at a high level, but is it unethical for you as an individual to participate if your actions do not directly prop up the system and/or cause harm to people? If you're a small business tyrant, I'd assume it's unethical to mistreat employees and pay them garbage wages, but would it be unethical if a business you own treats employees significantly better than similar businesses, or in some way serves to help a disadvantaged community (tribal businesses, as an example)? At a much higher level, is it unethical for countries with socialist goals (like China) to use capitalism as a stepping stone towards achieving those goals?
I realize I might be opening a can of worms on the 2nd point, but I think it's worth discussing what level of participation in the existing system should be deemed unethical. Rarely is it ever a black and white issue.
EDIT: Just to be clear, my argument on point 2 isn't to say that any form of private ownership isn't problematic, because it is, but to question whether every particular instance of that (or participation in general) should be automatically lumped into the same ethical category, regardless of the real world impact on individuals and communities.
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the value of the stock literally represents surplus value of the company.
but you're fine so long as you keep away from liberalism. make yo money.
No, the value is just a price. Part of it is the value of the company's capital, mostly exploited value, but some raised fairly. Largely it's just expectation of what the price will be in the future. It's speculation.
It's the dividends which are derived from proffit.
no
the price of a stock is entirely based on the profits investors expect the company to make. the most common tool our finance overlords use is calculating the present value of all the estimated future cash flows. that's how they determine/estimate market cap.
the price might fluctuate arbitrarily throughout the day by a few percentage points, but that doesnt mean the range is arbitrarily arrived at. that's why the biggest changes to price happens either when some news breaks or financial reports are released
the price of shares is literally market cap / number of shares
so yes, share price literally represents the present value of all the estimated future profits/surplus value.
The expected proffit has no relationship with the actual proffit. Companies don't have any obligation to pay shareholders the arbitrary amount they bought the stock for, so just because a stock is selling high or low, doesn't mean that value will be extracted.
For example, Tesla only recently turned a proffit, mostly on bitcoin speculation. Despite massive stock value rises over the past few years, they were making a loss.
dividends aren't 'the actual profit.' actual profit is dividends + change in price.
what matters most is whether or not the company meets its publicly stated target sales/profits. if they dont, the price falls, if they do, prices increase along with the market. if they exceed their stated goals prices beat the market.
the whole speculation thing is based on company performance. that's how it works for normal companies at least.
tesla is one of those weird companies that's based on hype and news. investors are willing to burn cash so long as the business grows.
Change in price is proffit for the guy buying the stock, but isn't actually exploited from the worker. It's just coming from the guy who buys the asset. If I buy a house, then sell it 10 years later at a higher price, that's supply and demand, not additional labour going in. Same with stocks. The trades don't come from labour.
but the stock literally represents the exchange value of the company...the labor, the fixed assets and how effectively those two things are being put to use.
if the value of the company goes up, that literally means the profit rate has gone up(again cash burning companies like tesla work a bit differently).
like...to a marxist, the definition of profit is literally the difference between the value the worker creates and the amount they get paid. hence yea any given share represents labor being exploited.
idk how what I'm saying could possibly be wrong.
Because we’ve seen the stock market, by and large, act in ways which are completely untethered from material reality.
Aggregates like the Dow Jones are a full 50% higher than they were when trump took office in 2016. It’s been five years! I see absolutely no metrics tied to exploitation of labor or whatever else that would explain a 50% rise in asset prices. Rather, profitability has long been falling for companies as a whole.
So the argument that “stocks are inherently speculative assets whose prices are simply determined by the amount of money that has nowhere else to go” (i.e., money which cannot find a more lucrative, actually exploitative investment like more factories or whatever) is far more convincing to me personally.
Lets ask the beard dude himself!
“I have, which will surprise you not a little, been speculating - partly in American funds, but more especially in English stocks, which are springing up like mushrooms this year (in furtherance of every imaginable and unimaginable joint stock enterprise), are forced up to quite an unreasonable level and then, for the most part, collapse. In this way, I have made over £400 and, now that the complexity of the political situation affords greater scope, I shall begin all over again. It’s a type of operation that makes demands on one’s time, and it’s worth while running some risk in order to relieve the enemy of his money.”
When you trade stocks, all you are doing is trading places with someone who had the stock before you. It is completely zero sum and has no effect on the economy. The existence of the stock itself, which represents a company extracting profit from labor, is a problem you cannot solve by not having a 401k.
Might as well use the system to your advantage that you are forced into
