Investing Catechism

Quote from omegapoint:

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.
More...

It warms my heart that some of you guys understand what I am saying. For a while there I thought I was talking to a brick wall.

I will keep this thread alive from time to time as I see other illogical (I am trying to be nice by using that word instead of underhanded) actions by corporations.
 
Quote from nitro:

It warms my heart that some of you guys understand what I am saying. For a while there I thought I was talking to a brick wall.

I will keep this thread alive from time to time as I see other illogical (I am trying to be nice by using that word instead of underhanded) actions by corporations.
More...

Here is another conceptual game that might be played. Stock XYZ has a high PE. XYZ buys a company with low PE stock. The shares of the low PE business all of sudden becomes very high PE, and at the same time increase worth of stock XYZ.

So it is in playing with non-linear algebra to increase value of overall companies!

This is where people who do their calculations are wrong. Notice that the business are what they were. Nothing changed, just mixing two PEs to make money for XYZ, and the CEOs of the cheaper company.

PS: The above is also done in reverse if XYZ is old and about to die, they buy a young nice name high tech company and change their name/etc to get a higher PE.
 
I understand Nitro's point completely. I understand the counter argument as well. But Nitro's argument is based upon how you benefit DIRECTLY from it's actions as a company.

For example you own a house and it appreciates but according to a balance sheet a house is still a liability because it has many expenses associated with it.

Nitro's main point: Dividends benefit investors directly. The money that comes from stock price appreciation comes from a larger crowd of people bidding up that specific asset.

Money that comes from dividends don't come from other shareholders but rather the company itself.

Very Simple
 
Nitro is pointing out the core principle that guides the stock market. A core principle that's specific. Money from stock appreciation comes from other investors. Money from dividends come from the corporation based upon what it earns. I want to be the person that directly benefits through a subsidy not from a bidding war with investors inside of a pit. Net surplus to you comes at the expense of another investor not at the expense of the corporation.

Nitro you wouldn't have to argue with so many people if you gave an opening post that specifically stated your thesis. Than people would shut their mouths and listen.

You gave a question, which was an open invitation for people to post a counter argument. Thus you keep hitting a brick wall because people want to show their intelligence than you kick their butt. Then they give a response to your response. The cycle is endless. People want to be right on these forums.
 
I've known this for a long time as well. I just kept my mouth shut about it, because I'd deal with a crowd of lemmings who hold religiously to a belief and not consider the counter argument. Long term subsidies work like this.

If I own shares in Annaly Capital Management with a dividend yield of 16.11% since it's a real estate investment trust It has to give 90% of what it earns to avoid paying taxes.

Sounds good to me, consistent dividends whether the company likes it or not.

Ok, if I were to reinvest all of my dividends that are paid out each quarter here are the results over a period of 10 years

$10,000 = $48,010.21

On the first year I would earn $1,600

On the 10th year I would earn $7,681 without including the dividend growth or the increase in share equity.

*income increase's each time I reinvest the subsidy* this is direct benefit. This is true investing. This is what Nitro was talking about

Not including the price appreciation on the stock itself. From earning a subsidy I get an added benefit of appreciation and a means to reinvest what I earn.

Blue chips hardly ever increase by 380% over 10 years. Not only that I didn't even include the 10% average appreciation the stock market gets which I could also apply and I can also add the dividend growth as well.

Hmm... get the picture? You have to keep flipping stocks but with a subsidy you can keep reinvesting your dividends while maintaining shareholder interest.

That's why I buy REITS safer long term benefits that increase in value intrinsically, higher dividend yields over a period of time, and also the ability to reinvest the subsidy I get inside of the company to earn a larger subsidy.

Wow, not rocket science is it? If I dollar cost average a REIT that pays a subsidy I still increase my asset base by 380% no matter what because it's a game based upon percent increase and average increase of the stock market. Even the DOW doesn't increase in value by 3 times in 10 years so why should I buy a major blue chip?
 
Quote from alexandercho:

I've known this for a long time as well. I just kept my mouth shut about it, because I'd deal with a crowd of lemmings who hold religiously to a belief and not consider the counter argument. Long term subsidies work like this.

If I own shares in Annaly Capital Management with a dividend yield of 16.11% since it's a real estate investment trust It has to give 90% of what it earns to avoid paying taxes.

Sounds good to me, consistent dividends whether the company likes it or not.

Ok, if I were to reinvest all of my dividends that are paid out each quarter here are the results over a period of 10 years

$10,000 = $48,010.21





On the first year I would earn $1,600

On the 10th year I would earn $7,681 without including the dividend growth or the increase in share equity.

*income increase's each time I reinvest the subsidy* this is direct benefit. This is true investing. This is what Nitro was talking about

Not including the price appreciation on the stock itself. From earning a subsidy I get an added benefit of appreciation and a means to reinvest what I earn.

Blue chips hardly ever increase by 380% over 10 years. Not only that I didn't even include the 10% average appreciation the stock market gets which I could also apply and I can also add the dividend growth as well.

Hmm... get the picture? You have to keep flipping stocks but with a subsidy you can keep reinvesting your dividends while maintaining shareholder interest.

That's why I buy REITS safer long term benefits that increase in value intrinsically, higher dividend yields over a period of time, and also the ability to reinvest the subsidy I get inside of the company to earn a larger subsidy.

Wow, not rocket science is it? If I dollar cost average a REIT that pays a subsidy I still increase my asset base by 380% no matter what because it's a game based upon percent increase and average increase of the stock market. Even the DOW doesn't increase in value by 3 times in 10 years so why should I buy a major blue chip?
More...

----------------------------------------------------------------------------------


Ahh, You buy more share with dividend money, and make more money from money not work for.
 
Now let me change my example what if I had $100,000

Reinvesting my dividends over a period of 20 years?

$2,304,979.91

a 2,204% increase on investment over a period of 20 years.

When you first start out you would earn $16,000 a year

On the 20th year you would earn
$368,000 a year

Goldman Sachs Estimates by 2029 the average middle class income in the United States will be $90,000 currently it's $29,000

So to be blunt your yearly income would be 4 times the national average if you would constantly reinvest your dividends.

:D :D :D :D

This is the foundation of money in your pocket first. Rather than playing the game of appreciation.
 
Now let's say we're an average American that decides to constantly add to the nest egg on top of what we earn from dividends?

I start with $100,000.
My yearly income is $100,000 and I decide to be frugal and only spend half of it. $50,000 a year on expenses, mortgage, car, insurance, food, gas, whatever
I start with $100,000 and I add $50,000 at the end of every year.

Ok, how much will I earn over a period of 20 years?

$9,195,542.12 at a 16% yield the investor would earn $1,600,000 a year on average.

WOW! the annual addition of $50,000 doesn't mean squat towards the end of the reinvestment period. Just at the beginning.

Very nifty eh?
 
If you want to retire invest into a basket of companies with large dividends. Real Estate Investment Trusts work to.

Real Estate over a long period is much more consistent than investing into the DOW. Maybe the intrinsic value of the stock may fall but as long as the Dividend yield doesn't it will give you a net surplus over a long period of time.

Sounds good? Now, that's a retirement plan. The next time a financial planner suggests dumping you into a random assortment of mutual funds and insists the 10% appreciation rate the stock market gives. Just give him the finger and say no. Because I have a better plan than yours.

Also REITS tend to have the same dividend yields for a long time and their price movements stay in the same range. If you buy at the peak or the bottom it won't matter because the yield % tends to be high no matter where you buy it at relative to other instruments in the stock market.
 
You must log in or register to reply here.
Back
Top