Some books to restore financial common sense in 2023

WHAT is a share price? It sounds like a stupid question — the answer to which is “the amount of money the market is prepared to pay for a share in a company on any one day”.

But that’s not enough of an answer. You must then ask why anyone would ever pay anything for a share. Sure, it represents ownership of a tiny fraction of a company. But then what? What can you do with the theoretical ownership of a few bricks, a tiny bit of goodwill, an itsy bit of an app or a few pipettes of pharmaceutical product? Absolutely nothing of course.

As the late Robin Angus, one of the founders of Personal Assets Trust, has written: “a share in an operating company is by itself actually entirely useless”. An asset is only an asset if it fulfils one or more of three criteria: It must be capable of producing an income (income value), it must be useful (utility value), or a significant number of people must think that it has value for some other reason (conspiracy value).