Investing Catechism

[riskfreetrading]

Quote from ang_99:

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.

I was thinking that you understood, but from your post above, I am starting to think that you do not.

Only a handfull of stocks in a 100 would ever pay dividend in the future (look at the graveyard of stocks). If you take a chart that started at non-zero point (IPO price) add commissions, and since price ended at zero, you get a conceptual ponzi scheme from a loss/gain profit point of view.

 

[ang_99]

Quote from riskfreetrading:

I was thinking that you understood, but from your post above, I am starting to think that you do not.

Only a handfull of stocks will ever pay dividend in the future (look at the graveyard of stocks). If you take chart that started at non-zero point (IPO price) add commissions, and since price ended at zero, you get a conceptual ponzi scheme from a loss/gain profit point of view.

OMG, I'm done.

Good luck, you'll need it.

 

[nitro]

Let's take a look at some facts:

http://www.indexarb.com/dividendYieldSortedn1.html

Compare that with

http://www.indexarb.com/dividendYieldSortedsp.html

 

[nitro]

It is a friggin joke that, MSFT, a company that by market value is in the top 10 companies in the world, generates the cash they do, and has the 140th highest yield in the SP500.

You are being robbed if you _invest_ in MSFT.

 

[Jesus]

Quote from ang_99:

OMG, I'm done.

Good luck, you'll need it.

Pretty much what I'm thinking. Nitro you have over 12000 posts. riskfree trading you have over 3700. That means you guys have been on this site discussing stocks and trading for a long time. It almost blows my mind how you can have a combined 15000 plus posts on a stock and futures trading forum and completely not understand how the stock market works. Thats like posting on a literacy forum and not knowing how to read! Its mind blowing. Riskfreetrading, You think people invest in growth stocks because they might pay a dividend someday?!?!?! Not because their stock value will GROW. I seriously hope this is just a joke and you guys really do know better.

 

[nitro]

Quote from trendlover:

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?

What?

 

[spindr0]

Quote from nitro:

What do I do with a stock certificate? Wipe my ass with it? ...

I am asking why YOU would buy a stock, and then replace YOU by x, where x is anyone. I am trying to lead people to the conclusion that in the absence of dividends, stocks go up mostly in a ponzy scheme, and that the thing that makes that ponzy scheme work more often than not is the 401K phenomena.

Supply and demand is not a Ponzi Scheme. In fact, based on you comments, I don't think you really understand a Ponzi Scheme.

Society puts value on things. It could be stock, a farm, gold, tulips, guano dung, whatever. The price at which people are willing to exchange anything is fundamentally due to supply and demand. It doesn't matter if you can eat it or wipe it the next day when it comes out of.

When buyers outnumber sellers, price rises. When the price gets high enough, sellers enter the market. When sellers outnumber buyers, the price falls. The value of anything is determined by people voting with their money.

 

[nitro]

Quote from spindr0:

Supply and demand is not a Ponzi Scheme. In fact, based on you comments, I don't think you really understand a Ponzi Scheme.

Society puts value on things. It could be stock, a farm, gold, tulips, guano dung, whatever. The price at which people are willing to exchange anything is fundamentally due to supply and demand. It doesn't matter if you can eat it or wipe it the next day when it comes out of.

When buyers outnumber sellers, price rises. When the price gets high enough, sellers enter the market. When sellers outnumber buyers, the price falls. The value of anything is determined by people voting with their money.

Read all my posts. You are missing the other component that makes it a ponzi scheme.

 

[trendlover]

Quote from nitro:

What?

You ask why pension funds money go to the stock market. You say "What is in it for them?"
So I say if a pension fund say "We need ___? this much money to pay to people who take the pension money when they are old, so they make a model to show (expected) return. That return in the future did not happen, then they go into the stock market AGAIN to make the money, BUT before they did not mark to market what the (real value) of the fund is after the market go down. Now they look for same return (same model), but to pay their future debt, they need more investors for capital to bet with. This is how you nitro, see this like the ponzi scheme? So maybe the manager of the fund has guarantee income, but for long term the fund is not having enough money to pay the people who invest in that fund.

 

[nitro]

There is no contradiction. For example, when WAG gets too high to drive the DY too low, you should rotate out of the stock to other better value dividend paying stocks. If ALL stocks that have a dividend are in the stratosphere so that their dividend yield is less than say 3%, then go to cash!

Quote from riskfreetrading:

There is a contradiction in your thinking. Here is how to probably see it.

If every investor were to elect DRIP on all their investments, what do you get? a stock that does not give dividends. Worse, you even lose if you pay taxes on the dividends. So according to your argument against non current dividends, you should not own this stock. Own and not own conclusions at the same time?

So your argument is flawed. What you should say is that one should not give money to a company that does not demonstrate it can give it back, as the reason one invest in the company is that he will get his money back in the future and more (not from selling stock to another, but from future dividends).
The selling of stock is only an exchange of rights on future dividends.