[PEN-L:29510] Re:Re: Re: Rising stock market redistributes wealth?

[Ben Day <day@xxxxxxxxxxxxxx>]

At 07:39 PM 8/16/2002 -0500, Bill Lear wrote:
> I still don't get it.  If I have 10 shares of 1 dollar stock and it
> goes up by 1 dollar, I have doubled my money (I mistakenly said
> earlier I had 10 times more money!).  My neighbor with 10 million
> shares has also doubled his money.  The wealth of each of us, purely
> through the stock market, has risen by 100%.
>
> Baker's point seems to be very narrow --- that the rising stock market
> itself "is primarily a redistribution".  If he meant possible
> associated price inflation, why didn't he say that?

Well, the original refers to those with little or NO stock - whereas your
hypothetical includes only those with a little and a lot, and it also
assumes that a "rising" stock market benefits all investors equally (or
proportionally to the size of their investment). I suspect that
"redistribution" may be just a poor choice of words, since we normally
associate it with gov. collection and reallocation. Maybe he just means
that a rising stock market contributes to growing income inequality - given
the existing distribution of stock holdings? Along these lines, I'm sure
the obverse is true for a falling stock market as well, given the limited
ability of small investors to hedge, diversify, invest in knowledge
accumulation and strategic planning, etc.

-----Ben