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Sure thing, stocks and stock markets are nothing new, see Dutch East India Company and the settlement of Rhode Island and Connecticut. Prospectors sell shares in a company, and those share values are tied to a potential future profit once items, goods, products, etc. are sold. No different than investing in, say Apple Inc.
The problem begins when a company sells shares of a company which, for example, doesn't sell a product so much as a service. How can any average american investor making say $46k a year (the median income in U.S.) begin to analyze the risks and costs of a company like AIG? or Goldman Sachs? How can anyone? If the valuation of a company's stock is based on public opinion and the opinion of "experts" then all that is necessary to inflate the shares is to convince people that it's really worth something. Who stands to benefit the most? Those who own shares as part of a bonus or salary package, because many times they essentially paid nothing for them. If the stock tanks, or company folds who's on the hook for the fallout? We, the taxpayer are.
Enron is pretty classic example. They were an energy company, so yes they did "produce" electricity (for a further digression see Tesla's ideas on electricity production). Eventually they lobbied congress and the states to deregulate the electricity market. California was one of many states to do so. Enron's stock went through the roof as their profits also soared. Employees were told to place their 401k saving into company stock, which looked like a good idea for a couple of years. In fact, completely healthy retirement plans were rolled into Enron's own heavily self-invested as Enron bought out smaller electricity and power companies. Well, I'm going on too long now...Enron folded and brought down many average people with it. The experts were shocked. But enron was hiding losses and inflating their stock share prices, or rather people were inflating it, because it's all supply and demand with stocks. The perception of value is what is most important and what leads to a valuation because people want to buy a hot stock, which drives up the price.
Finally, my point is that the protections afforded corporations often outweigh the protections afforded us the lowly taxpaying citizen. When Mary's Corner Bakery or Fred's Tire Center closes on Main street, Bernanke will not be there with a bailout package. In fact, Fred and Mary may well be on the hook for all their losses, outstanding balances, etc. If they were unlucky enough to invest heavily in companies like Bear Stearns, then who can help them? Social Security is some help...children...friends...family?
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