I’m happy to see this being noticed more and more. Google wants to destroy the open web, so it’s a lot at stake.

Google basically says “Trust us”. What a joke.

  • wavebeam@lemmy.world
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    1 year ago

    Well it’s not that they “need to pay bills” they make plenty money to pay bills with the revenue they already earn. The issue is that capitalism demands not just profits, but continually increasing profits each quarter.

    • Aceticon@lemmy.world
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      1 year ago

      To put thing in perspective and trying to not use too obscure financial terms:

      • Company’s stock prices are related to their Earnings (i.e. their profits) via what’s called a Price/Earnings Ratio: basically the idea is that each stock entitles you to a shared of their profits (via dividends: a share of a company’s profits which is paid to those who have shares in that company), so if their profits are higher their stock prices should be higher too because each stock entitles you to get more money in dividends.

      There’s some extra maths here because different companies split iownership in a different number of stocks but the basic principle is that the total value of all stocks in the company at the current stock price are related to its yearly profits.

      Now, run-of-the-mill companies (say, traditional automakers, energy companies and so on) have P/E ratios around maybe 20 or 30 (it varies from company to company and depends on the general stockmarket mood, going up when people are more hopeful - i.e. bully - and down when they’re less hopeful - i.e. bearish).

      By comparison Tech companies (and that includes automakers who managed to pass themselves as Tech companies, such as Tesla) have P/E ratios of around 80, 120 and going all the way at times to infinity for companies not making profits (Twitter for a long time was losing money and had a P/E of infinity).

      By the way, this is how Tesla manages to have a higher total market worth (the price of each stock times the total number of stock) higher than companies which sell 10x+ more cars: it’s treated as Tech, hence gets this magical boost to stock price.

      So, what’s the stated reason for this: well, those holding those stocks at such prices claim it’s because the growth prospects of such companies are huge.

      In reality (IMHO) a lot of it is just speculation, and now that holding stocks at inflated stock prices whilst you wait for a bigger sucker to buy them from you for even more money is something that might actually loose you money (unlike before with zero interst rates, now that interest rates are back up you often could be making more money from it if you bought treasuries instead) the speculative “hold, wait and see if they grow massivelly” posture on stocks (which was even done with lent money on which 0% interest was paid) isn’t anywhere as appealing so it’s unravelling.

      So all of the sudden Tech companies are having to justify stock prices the same way as traditional companies do: by having profits that justify them, hence lowering their P/E ratios from la-la-land values to something more realistic.