"Wayne C. Gramlich" wrote in message
...
F. George McDuffee wrote:
On Sat, 14 Mar 2009 10:49:30 -0500, GeoLane at PTD dot NET
GeoLane at PTD dot NET wrote:
snip
For anybody above the lowest tax bracket, stocks are a better place to
save than a savings account for tax reasons alone since stocks are
taxed at a lower rate than dividends in order to encourage people to
invest in our companies.
snip
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While widely touted, "investment" as used here is another
word/mind game. When you by a stock or bond on the secondary
markets you are investing in the "market" and not in a company.

Strictly speaking the only time buying a stock invests a dime
into a company is at the IPO. After that it is simply
speculators swapping stocks back and forth, with *NONE* of that
money going into a company for investment, economic expansion and
job generation. {question -- why then are secondary market
sales/speculation subsidized by the tax payer by the lower
"capital gains" rates? As this is not generating any "economic
added value" shouldn't the rate logically be *HIGHER* not lower?}

Even with an IPO, a significant fraction of the money is "creamed
off" by the underwriters, and even more is skimmed by the people
that got stock options before the IPO [such as high level
employees and venture capitalists] in that the money that is
raised by the sale of their stock goes to them and not the
company. The money [and the capital gains tax rate] received by
the executives and V/C may well be justified as they did create
the company, but it should not be confused with "investing" in
the company, as the company doesn't get a penny of it.


Unka' George [George McDuffee]

Companies issue stock both before and after IPO (initial public
offering.) Sometimes the shares are skimmed by underwriters and
sometimes they are not. The overall concept of companies issuing
more stock is called stock dilution and is discussed somewhat in
wikipedia:

http://en.wikipedia.org/wiki/Stock_dilution

IPO is *not* the end of issuing stock for most companies.

In addition, a company takes a certain amount of its profits
and uses them to expand and grow. A stock has a book value:

http://en.wikipedia.org/wiki/Book_value#Stock_pricing_book_value

By owning shares, the shareholder is part of this investment
process as well.


Wayne,
You aren't related to the late Ed are you?

JC