Stocks.

[Erik Mortis]

I hear speak of them.. and I have ideas..

1. Companies can create a finite amount of stock, approved by the Minitrade.
2. Companies can set the initial cost of this stock.
3. The company gets all the profits from the initial sale.
4. When it is sold later, people have to negotiate over the cost. No automated stock calculations.

That's it. And see what happens. Will people buy stock? Will companies offer dividends?

In theory I could automate a way.. someday ..to keep track of stocks. Not the prices. Just who owns what.

[Andreas the Wise]

My first thought is this might require a change in the Lawbook about 1 owner per company.

My second thought is ... boy this could be abused. "Oh yeah, lets set up stocks for our company. You all pay me 20 erb each. Yay, I have 500 erb. *pause for three months* Oh, the company had no business so no dividends ... but I still think it'd work ... keep waiting."

For this to work very strict rules on ownership and dividends (ie pay out of profits) would be needed. So we need to define profits (in the case where there are multiple workers) etc ...

[Erik Mortis]

You can set those rules as Minitrade.. or.. if you allow my stock market to start, when it does. We can establish a trade commission to regulate how stocks are traded etc.. with the MiniTrade as a voting member and with Veto power. Or something.

[Andreas the Wise]

We just need to get the basic rules sorted. Stock Exchanges can be rather complicated - but I'd love to get a working one well ... working. Unlike other companies though, I think we do need to think through this one properly before approving it.

Start from the start.
a. Ownership - Are we selling the ownership, or do we make whoever registered the company the "one owner" and they must retain 51% of shares?

b. Dividends - I think it's best to make a blanket law about this - probably that 100% of profits must be paid out, on the division the shareholders have (so that way, the owner gets at least half the profits but the other people don't just buy the shares pointlessly). We may have to clarify the difference between revenue and profits also ... I think this part is important because otherwise the person selling stocks gets a whole ton of money for nothing, which could easily be abused. Perhaps add in corollarlies about closing companies and paying back shareholders?

c. The actual trading part - do people put their money to a "stock exchange" account that sorts it, or will you facilitate buying and selling, and they just transfer erb directly to the person who now owns it. Apart from that I'll leave this entirely up to you, a and b are the more important bits to me ...

[hypatias mom]

Or perhaps even:

d. various stocks are bundled into something like an investment fund, and people purchase shares in this blanket fund. There seem to be a number of possible financial instruments that can be created here.

[Hesam Jayatar]

There are some things which cannot be changed here.

First off, Companies CANNOT be sold. It would confuse things to no end. Secondly, as Andreas stated elsewhere, it doesn't mater how many investors your company has, the erb are going to ONE person. How you deal with that is your own business.

So if we're going to have a stock market lets look at how we can do this pragmatically. Firstly, key concepts.

1. Stocks (as we know) can either bolster or break the value of a publicly traded company.

2. Through sound business practices and investments, the value of a stock rises with the profit of a company.

3. An increased stock value can cause a share split, the issue of dividends and therefore further increase the value of a company.

4. However, a company with an increased stock value that DOES NOT produce profit from its products and services can create what's commonly known as a "Stock Bubble". This is where speculators heavily invest in a company and purchase it's stock. This stock then increases in value with the demand. This cycle continues until someone realizes that the company has no chance of making a profit that is equal to the investment. A good example of this would be investment in Internet advertising during the late 90's.


All of this is pretty basic I know, but the important part is no. 4. The reason I bring it up is this:

Placing an arbitrary value on a companies stock, without it relating to their profits will cause a "bubble".

If we take a company, and can determine it's total profits (ie the number of erb it makes) and then issue the value of a stock at 2 to 5% of it's total weekly (or monthly) income, we can have a baseline from which to draw the value of a stock.

At that point, if people invest, the income of the company increases and therefore increases the value of 2-5% of its profit. depending on the percentage that the stock is based off of.

eg.

Omega makes 200 erb in profit. It's stock value is placed at 5% and 20 stocks are issued for public trading at a cost of 10 erb. Andreas purchases a stock for that sum (10 erb). All of Omegas stock gets bought up by other people. Which means a total income of 200 erb. This in turn, increases Omegas profit for a total of 400 erb. Which in turn increases the value of Andreas 1 stock to 20 erb.

Now if Omega doesn't make as many sales of product in the following week, it's non-stock income will drop. Let's say it drops to 100 erb. This in turn will also reflect the value of the stock.


This is the easiest way I can see a stock market working for us. I'm sure the majority of it can be automated, but it does seem it will be time consuming to make. Thoughts?

[Erik Mortis]

Honestly, I'd rather just let people trade and sell at prices they agree on. Which will cause it to reach it's own equilibrium. and just use the bank for the actual money transfers. and maybe automate something to keep track of the stocks themselves. We should try not to depend on automation.

[Hesam Jayatar]

I can see your point, but as one of the two people that has to regularly maintain the economy, I prefer automation.

[Erik Mortis]

As the one person who has to implement all these grand ideas, I prefer a lack of automation. Further, automation promotes laziness. I rather we use the automation to take care of the nuts and bolts of the system, but have the majority be done by people. Promotes activity. Or at the least, slowly introduce automation.

[b3n|<3r|\|]

Erik - lack of automation killed the Babkhan economy in a matter of weeks. It is imperative that we don't allow that to happen in Shireroth.

[Hesam Jayatar]

Considering he hates the economy, I doubt this will help.

[Andreas the Wise]

I agree with Erik (I think). Don't make the price of the stock arbitary. The major problem with that is who pays out if someone wants to sell. Make the stock like the real world - its price is the latest transaction between buyers and sellers, and if someone wants to sell, they can't just sell back to Erik or the company, but have to find a buyer. And if they can't find a buyer at that price, they have to lower it etc ...

Though I can see Hasan's guideline is good for setting the price of the initial float, I wouldn't impose that price on the market after that time. Also, money from a float doesn't count as profit ... I remember that much from accounting.

Are we all happy with dividends being paid out to those who hold the stocks from the profit?

[Hesam Jayatar]

Ok, I've re-read this thread. I agree with Erik now. I just picked 2 or 5% as an arbitrary number to give an example anyway.

I think dividends should be up to the policy. I mean, they would certainly increase stock value.

[Andreas the Wise]

Well, to buy a stock if you won't get dividends seems largely pointless, unless you can convince others to buy it from you at a higher rate ... but perhaps the amount paid out should be up to the company. I think we should set a minimum though - perhaps 50% of profits must be paid out to shareholders. Do remember that I'm going for the "owner of the company holds 51+% of stocks" so that means, in reality, only 25% or less of profits are going to people who aren't the official owner ...