Investing Catechism

[nitro]

Quote from trendlover:

Nitro, you make sense because the company who pay the dividend is PROOF they make enough money to profit for themself AND give profit to the share holder, and show that profit is separate from how many buy or sell their stock.

It is not so much the proof, it is that the company is subsidizing my investment in the stock when there is a dividend, and hence things like earnings, growth etc mean something to me. If there is no dividend, then I have decoupled anything that happens to the company, e.g., earnings, blah blah etc. It is all a game of you against me. That is fine, but that is called a beauty contest, or a ponzy scheme, or simply trading on what I think you think the stock is worth, based on numbers that ultimatley mean nothing to you and me. That pension funds buy into is more interesting, and is the question that we should ask them. What is in it for them?

You do have a point though. Lies like ENE would not be possible in a dividend paying stock.

 

[ang_99]

Quote from nitro:

So MSFT was a great investment in hindsight because we know iti s a success? What the 100 companies that go broke for every MSFT that comes to market? Or are we allowed to go back in time and invest in 1986? Ever hear of something called suvivorship bias?

You are not reading what I am writting. Go back, read every post, every explanation, and try to follow the logic. I can't respond to everyone with the same question as to why ___I___ believe non-dividend paying stocks is just gambling on a ponzy scheme. It's already been explained.

For example, JUST one post above yours, I explain that it took massive efforts from pension funds that control ungodly amounts of money to extract a dividend from MSFT. But you ignore that. Why on earth, if I am Jeff Bezos, would I EVER give some punk that invests in my company through my stock ANYTHING or a dime, unless forced to?

Its sounds like you want a guarantee. THAT IS NOT INVESTING. RISK is associated with investing.

Of course a lot of company's go belly up. Thats why they provide you with a prospectus BEFORE investing if you choose. Thats why they are required to report earnings, etc..

I think you are not understanding what investing means.

Dividend paying stocks are theoretically less risky but that doesnt mean more risky stocks are not investing.

What the hell are you talking about bro.

 

[nitro]

Quote from ang_99:

Its sounds like you want a guarantee. THAT IS NOT INVESTING. RISK is associated with investing.

Of course a lot of company's go belly up. Thats why they provide you with a prospectus BEFORE investing if you choose. Thats why they are required to report earnings, etc..

I thing you are not understanding what investing means.

I don't want a guarantee? Where did I say that? I want a dividend. The only way I can get a dividend is to be in the common or some other class of shares, all of which have exposure to risk.

AMZN has no dividend, hence it is ALL RISK and a ponzy scheme between you and I that turn over the float. Earnings? Who cares? It won't make a hill of beans of difference to me as an INVESTOR since it doesn't subsidize my investment in the company.

 

[Jesus]

Nitro, I want to be as nice as possible, but the more you post on this subject the more and more ignorant you appear to be.

You are over thinking this. Simplify it. The stock market is not some ponzi scheme set out to F*ck you over. Its very simple. When you buy a share of stock you are buying a part of a company. You are entitled to all of their equity assets AND earnings, up until the day you sell. You cannot access the earnings personally. But the more earnings the company gets, the bigger the company gets and the more value it retains (unless management miss-handles earnings). If the company is keeps getting more profitable, the value of the company should continue to go up. Since you are part owner, the value of the shares you own go up. That means they are worth more money. So you own an asset worth more money than before that you can now sell or hold in hopes of more future profitability. The value of your shares can also increase because other investors are willing to pay more for the company because it has consistent growth. So the company becomes more valuable because of how quickly they are becoming valuable.

The dividend is important in some stocks but not nearly as important as you think. When a company buys back shares it increases the value of the of your shares because there are essentially less pieces of the company to own and less owners.
If there are 100 shares outstanding, and you own one, and the company buys back 50 shares, then instead of you owning 1/100th of the company you now own 1/50th of the company. Which means you own more.

Also, stock prices do not just get pushed up by more and more buyers. They gap up or down all the time, reacting to news or some catalyst.

I do not know how to explain it any better, and certainly there have been good explanations previously. If you do not get how the stock market works by now you need to consider two options.

1. Quit trading/investing in stocks because you do not understand how they work. Stick to putting your money into things you can comprehend.

2. Flush out all of your paronoia bullshit out of your head because not everything has to be a scam set out to screw people over.

This reminds me of a short period of time when my friend was obsessed with direct investments in companys. He though he could buy shares of stock for less than they are trading for by buying directly from the company. He thought the whole stock market was a scam. He didn't understand how the market worked. He eventually figured out that direct investments only saved a commission. He wasted hours and hours of research because he, similiarly, had an overly pessimestic attitude, wouldn't listen to how things actually worked, and thought everyone was out to get him.

 

[ang_99]

Quote from nitro:

I don't want a guarantee? Where did I say that? I want a dividend. The only way I can get a dividend is to be in the common or some other class of shares, all of which have exposure to risk.

You can stick to the dividend paying world but that doesn't mean other stocks are not investments.

What happens if you're being payed a dividend, and your stock goes to 0 the next day (AIG). The people invested in AMZN are laughing at you.

 

[nitro]

Quote from ang_99:

You can stick to the dividend paying world but that doesn't mean other stocks are not investments.

What happens if you're being payed a dividend, and your stock goes to 0 the next day (AIG). The people invested in AMZN are laughing at you.

Then you are contradicting yourself above when you claimed I wanted a guarantee. If I have a dividend, I must certainly have investment risk, as you just pointed out in AIG, FNM, or scores of others. I am willing to bear that.

Non dividend paying stocks can be treated as an investment. I just claim that investment is a ponzy, or pyramiding scheme.

But you still have no idea what the premise of what I am saying is. See, if I were smarter, I would have known to cut my losses short with you already.

 

[trendlover]

Quote from nitro:

It is not so much the proof, it is that the company is subsidizing my investment in the stock when there is a dividend, and hence things like earnings, growth etc mean something to me. If there is no dividend, then I have decoupled anything that happens to the company, e.g., earnings, blah blah etc. It is all a game of you against me. That is fine, but that is called a beauty contest, or a ponzy scheme, or simply trading on what I think you think the stock is worth, based on numbers that ultimatley mean nothing to you and me. That pension funds buy into is more interesting, and is the question that we should ask them. What is in it for them?

You do have a point though. Lies like ENE would not be possible in a dividend paying stock.

Ok, with pension fund, that is the future prediction of the stock goes up, true? So is the pension fund (real value) mark to market, or expect?

 

[ang_99]

Quote from nitro:



Non dividend paying stocks can be treated as an investment. I just claim that investment is a ponzy, or pyramiding scheme.

A pyramid scheme is a non-sustainable business model that involves the exchange of money primarily for enrolling other people into the scheme, often without any product or service being delivered. (wiki)

Stocks are assets that are valued on the earnings/assets/potential earnings of a REAL business enterprise.

Dude, wtf are you talking about. Please go back to playing nintendo.

 

[Boib]

I have no problem “Investing for Growth”

Once a company has established itself and has earnings it has to decide if it is best served by returning the earnings to shareholders or re investing the earning in the company.

As long as the company is growing its assets or book value by using its cash flow to expand I see it as a good investment.

You want to increase your investment by DRIPing into a company why is it such a bad thing for the company to do the same thing As long as the business is growing so will your investment.

If you need an income then by all means invest in a dividend payer. If you are going to DRIP into a stock I assume you have confidence in management to keep growing the company. Management has basically said that they believe that you can put the money to better use than they can.

I think you’re arguing that stock price has no relation to stock value. By eliminating stocks that don’t pay dividends from your investment choices, you are limiting your opportunities.

 

[riskfreetrading]

Quote from nitro:

No position in AMZN, stock or options, before of after earnings. If I did, I would disclose that.

I believe you, and glad that you are safe. Thanks for answering.

My assessment is that among growth stocks, at best a handful among a 100 would pay dividends in the future, which would make the rest of the stocks a ponzi scheme in hindsight.

So finding the one that will ultimately pay handsome dividends is like finding a needle in a haystack, which shows that the growth investor needs skills, diversification, patience, time and other rare skills.

In other words, the odds are stacked against the average investor in growth stocks.