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Just listened to Warren Buffett's thoughts on Bitcoin and he claims that Bitcoin is a non-producing asset which has no value. Buffet also points out that it is just the hope that others will be excited and Bitcoin's demand will increase in future that is increasing the value. Making this logic, Mr.Buffet concludes that Bitcoin is useless.

However, I think I can correlate the same thing with stocks as well. We do not get any EPS (earnings per share) or preferably dividends in common stocks. We just hope that people will demand that stock in the future and that's why stock price rises and we sell it. So, if stock markets can work like this, can I also assume Bitcoin to last long?

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    Does this answer your question? Why aren't non-dividend stocks ponzi assets?
    – windwally
    Commented Jan 18, 2022 at 14:18
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    Stocks are a claim on the assets of the company. What's the backing asset for cryptocurrency?
    – D Stanley
    Commented Jan 18, 2022 at 14:30
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    @AxiomaticNexus the US government is not similar to "bitcoin users", it's a specific and clearly identifiable entity with known rules about its behavior. Thus when you put faith in it - you have something explicit and tangible you're relying on (an actual physical entity you can hold accountable).
    – littleadv
    Commented Jan 18, 2022 at 16:24
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    @AxiomaticNexus US Government is controlled by individuals nominated and confirmed by elected officials, who need to comply with court decisions and can be removed from office by elected officials. So, who do I sue to enforce behavior with blockchains? Where do I vote for representatives who'd decide how blockchains work?
    – littleadv
    Commented Jan 18, 2022 at 21:55
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    @AxiomaticNexus This is meaningless drivel. The fact remains that regardless of the 'backend mechanics', transactions between 2 people in a society with laws, must follow those laws. Circumvention of the law due to 'hands-off this is software' subterfuge does not suddenly make the blockchain 'law', it merely dictates how it operates. An instruction manual to pickpocket someone's wallet through use of a contrived Rube Goldberg machine equally fails to represent the law. Commented Jan 19, 2022 at 4:29

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Stocks represent legal ownership in companies. Hopefully, those companies are actively creating value (by producing usable goods, or services, etc.). That value creation leads to profits. Those profits legally belong to shareholders.

Shareholders vote for the Board of Directors. BoD appoints the CEO, and ultimately sets a dividend policy. If the BoD [legally acting in good faith to protect the interests of the shareholders] deems it best to reinvest profits in the business, they do that. If they deem it best to pay dividends, they do that. Eventually, dividends get paid [even if a policy is currently 'don't pay dividends', really what that means is 'until more shareholders vote for ultimately a new dividend policy, continue reinvesting for growth].

Therefore, regardless of what a dividend policy says today, shareholders are the beneficial owners of the productive assets of the companies in which they invest. There are various methods of attempting to ascertain the value of 0.0000001% ownership of a company with $x in revenue / assets, and some people decide to sell shares based on their own valuation compared to what the current other best offer is in the market.

Does this mean company stock is always valued 'correctly'? No. Errors in attribution of value can be huge. BUT - that stock ownership legally does mean refer to ownership of productive economic assets.

Owning 1 satoshi is just a password-protected time-stamp that says only you have the right to send that time-stamp to a different address. Do you see the difference?

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  • There are stocks without voting power or dividends, GOOG for example...
    – littleadv
    Commented Jan 18, 2022 at 16:25
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    Voting power doesn't matter. Just because a stack hasn't paid dividends doesn't mean it won't pay dividends ever. Commented Jan 18, 2022 at 17:15
  • I was referring to the second paragraph that seems to allude that the expectation of future dividend comes from being able to vote for BoD which would decide to pay them.
    – littleadv
    Commented Jan 18, 2022 at 17:35
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    @littleadv Whether your individual stock has a vote or not (and realistically, the voting power of non-institutional shareholders is Nil), legal protections attempt to prevent minority shareholders from having value assigned solely to elite-level voting shares. Commented Jan 18, 2022 at 18:14
  • Dividends are not the only companies return value to shareholders; they also purchase their own shares, which provides a support for the shares' value. Regarding Google, specifically, it has long history of share repurchases. Interestingly, until recently they only purchased class C (nonvoting) shares, not class A (voting). Because of this, the class C have in the past traded at a premium to the class A. (qv: barrons.com/articles/… )
    – Nobody
    Commented Jan 20, 2022 at 15:37

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