Investing Catechism

Quote from nitro:

I remember when I first started "trading", I used to try to game C preferreds. I used to think how easy it was to make money in these things if you were patient. Just wait long enough and they would invariably go from $25 to about $18 or $19. I would start buying at $21 and add from there. Sure enough, they would be at $25 again within months. I was 100% certain these things were rock solid.
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It was easy to make money in the preferreds before the sub prime crisis. In those years, the average yield for the A rated pfds would cycle b/t 6 and 7 pct like clockwork. It was as you said - buy in the low 20's and wait for the recovery, receiving a nice dividend in the interim.

Given the nature of the vehicle, trading limits were fron the high 20's to zero (for a pfd issued at $25) and in order to avoid the zero side, you had to pay attention to the parent stock, C being a good example. Put the words bank, financial or realty on it and you had a world of sub prime hurt, many dropping below $5 - an utterly amazing yield of over 20%.
 
Quote from nitro:

Could I game it by trying to capture just the dividend by exiting the stock right after the dividend payment and getting right back in before the next ex-date? Sure, why not, but that falls under a trading strategy, not an investing one. But it might work, and traders try all the time.
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Getting paid with your own money gets you nowhere.
 
Quote from Madison:

Are executive bonuses paid in options or in dividends?
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The sarcasm in your post is deafning.

That is why I suggested the quoted post below in an earlier post:

Quote from nitro:

Ok,

I have one more thing to add.

This whole thing of bonus compensation and executuve pay and for talent retention. Want to solve it simply? CEOs etc get a base salary, a good salary at that. The bonuses however gets payed through the same dividend that you or I get if we are shareholders.

Employees are issued stock, not to sell, but to reap the dividend. When they retire, quit get fired whatever, they have to give back the equity and no money changes hand. So the equity they hold from the company is on loan strictly to reap the benefits of the dividend. So the company has to go out to the market and buy the common in order to issue stock on loan to it's employees for this purpose.

If the board votes to raise the dividend because the earnings are lasting, the CEO etc get payed nicely. If not, then guess what, the earnings are not likely to last, and the CEO and other bonus based employees gets payed based on the current dividend. Since they hold the common, even more incentive to keep the price higher through higher dividends and bigger earnings.

This aligns EVERYONEs interest, and it does so in fantastically simple terms.

So GS wants to pay out $17B in bonuses? They have to pay it out through the dividends. They win, I win. Otherwise, why the F*** do I give a shit what GS makes or not? Why would I ever buy the stock? Or AAPL, or a whole bunch of other stocks that pay dog shit for a dividend? Am I somehow richer just through association with these companies because I own the common? Only in a ponzy scheme.

SHOW ME THE BEEF
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It's true that money chases money hoping to sell and make money before there is no money.
Stock ownership is a scheme. It takes outside money to make an outsider any money.
The market was to exist to help companies raise money. But the largest companies didn't see that as the reason to come into the market. The stock market is emphasized in society, money comes into it directly from the Federal Reserve now to help maintain that "historic multiple". There would be no benefit to bringing a private company public if it was not a means to a richer end. Period. Bill Gates didn't need the hassle of quarterly guidance, he and Paul Allen could have just collected the company profit...except the stock market allowed them to cash out the future earnings all at once which is a better bet to take rather than risk that there will be future earnings.
Again, the stock market needs to be valued by society for it to work. This is why politicians (figureheads for corporate interests) wanted to create Health Savings Accounts. The 401k is the same idea, pin Joe-6-Pack's retirement to fundamentally change his political position. However, as the public does leave the market, it will be less important to the public to maintain high multiples. The stock market is a means to an end for company owners looking to cash out.
 
Quote from nitro:

The sarcasm in your post is deafning.

That is why I suggested the quoted post below in an earlier post:
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That would be rational, align executives' and shareholders' interests, and would be much more fair....but it would also be more work and less certain for the executives.

Much easier to use the shareholders' money to try to bid up their bonus assets. And as long as the shareholders don't object, why not?
 
Quote from nitro:

IBM buying back shares. Nice gesture, but why not raise the dividend? :(
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I assume you know! If dividend, they many not get the money back. If stock, they can get it back by selling stock later. Keeping a string to the money is a useful thing. It will also help them beat the earnings next time.
 
You've nailed in Nitro, theres been alot of talk about taking the casino out of Wall St. and restoring the notion of investing. Don't know how they'd do that since investment and the secondary market exist in separate universes. Meantime keep the threat of the greater fool theory near your trigger finger.
 
Quote from riskfreetrading:

I assume you know! If dividend, they many not get the money back. If stock, they can get it back by selling stock later. Keeping a string to the money is a useful thing. It will also help them beat the earnings next time.
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You have no idea, or maybe you do, how true this is. GE used to do this all the time. Fidget the dividend so they could appear to make or beat earnings by a penny. That is how they appeared to make their earnings estimates for so long.

Pure smoke and mirrors.
 
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