Investing Catechism

Jim Chanos in a Bloomberg interview suggests that some of the oil majors are essentially borrowing their dividend:

"...“If you look at their cash-flow statements relative to their income statements, you will see companies that haven’t replaced reserves in years, and haven’t seen any increase in revenues in years,” he said. “They’re borrowing their dividend. They’re in effect liquidating...."

http://globaleconomicanalysis.blogspot.com/2010/06/jim-chanos-shorts-oil-companies-based.html
 
http://www.portfolio.com/business-news/2009/09/23/oil-companies-invest-in-biofuels

"Oil companies have long been at play in the alternative-energy field. They’re covering their bets, they say, preparing for a world that needs all sources of energy—including alternatives to oil. Virtually every major oil company has invested in biofuels, or solar, or using hydrogen as a fuel, or geothermal energy, or wind. Their critics, though—and there are many—point out that the oil majors’ investments in alternatives are dwarfed by their continuing spending on the quest to find more crude. They should, in short, act less like oil companies and more like energy companies."

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Nitro, they cover their bets now.
 
Quote from nitro:

Jim Chanos in a Bloomberg interview suggests that some of the oil majors are essentially borrowing their dividend:

"...“If you look at their cash-flow statements relative to their income statements, you will see companies that haven’t replaced reserves in years, and haven’t seen any increase in revenues in years,” he said. “They’re borrowing their dividend. They’re in effect liquidating...."

http://globaleconomicanalysis.blogspot.com/2010/06/jim-chanos-shorts-oil-companies-based.html
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i read an article a couple years ago that said they ,big oil co's, decided that there wasnt enough profit left in oil,or oil,for more exploration and that they foresaw alternatives as the future,saying that the smaller companies with smaller net worth to maintain return on were doing the present exploration
 
"The great stock myth"

In 1985, Rajnish Mehra and Edward C. Prescott, economists then at Columbia University and the University of Minnesota, published a paper pointing out a strange anomaly they dubbed “the equity premium puzzle.” Since the late 19th century, stock investments in America had generated returns that were 6 percent higher than what economists call “the risk-free rate—the yield on an investment for which there is virtually no risk of losing your principal. The low-risk investments, such as short-term U.S. government debt, had yielded less than 1 percent.Those “excess” stock-market returns, which include both price appreciation and dividends, are much higher than you would expect if they simply reflected the risk of losing your investment (don’t even get me started on the arcane procedures by which economists arrived at this conclusion). Moreover, this premium cannot simply be attributed to an underestimation of future corporate growth by investors. Even when expected dividend or corporate-earnings growth is taken into account, stock returns are higher than one would predict...

http://www.theatlantic.com/magazine/archive/2010/09/the-great-stock-myth/8178/
 
Quote from nitro:

Please explain something to me. Today as an example, AMZN is up 25% because earnings obliterated analyst estimates.

What I don't understand is, who cares from an investor point of view? Break it down for me: how does the fact that AMZN made all that money, relate into money in my own pocket as an investor? People will say, well, the company has more money, so it can acquire other companies which will lead to even more revenues, and it can buy more books, update it's computers, hire more programmers, etc etc etc. But how does any of that translate into money in my pocket if I am an investor in AMZN? Unless I share in that profit, why would I ever care? Is the value of the higher earnings only that I know you care because you are an idiot, so I will be an idiot with you and anticipate that you are going to buy the stock, and I buy the stock too, hoping to sell it to an even bigger idiot later? Is it all an illusion?

To me, the only thing that matters as an investor is the dividend because ultimately, unless I work for AMZN, it is the only tangible way I can profit from AMZN doing well. And yet, investors bid up the stock of AMZN as if it was money they were making :confused: People say, dividends are double taxed, blah blah blah. That's why companies don't pay more dividends. Well, yeah, but it is real!

I must be missing something.
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Why are you confused ? Shareholders own the company when earnings go up that's more capital added to the company so its worth more.

I'll keep it simple you seem inexperienced. You run a company worth $10,000 today. You make $1,000 net cash profit. That makes your company worth $11,000. If you issued 10,000 shares for a $1 why on earth would you sell those shares for $1 now ?
 
Quote from nitro:

Trendlover,

I am getting really frustrated because I keep telling people that I understand what P is, I understand what E is. But people refuse to acknowledge the fundamental question: HOW DOES THAT TRANSLATE INTO $ for the INVESTOR if it isn't done through D?

I understand how that means the company is worth more though bigger E because it's book value just went higher either through more cash on hand, or more warehouses, or whatever else raise book value. What I am saying is, through what mechanism, does that value get translated into my pocket if it isn't through D?

People keep saying, well the stock price will go up. And I keep saying, WHY? It has to be in anticipation of a higher D? And yet, how many times do you see any of these tech companies have a D, let ALONE raise D? Why does anyone buy a stock simply because a company is worth more to SOMEONE ELSE? Don't you see? The price goes higher simply because someone buys it. The fact that the company had higher earnings is meaningless in the absence of D to the INVESTOR! So itis a ponzy scheme in the absence of D!

Ugh, I need a good example, because I have said this a million times, and I still don't seem to be getting accross that anything that is not a direct payment to me, is a ponzy scheme.

What is comes down to is this. People (investors) think that the company = it's stock price. That is so clearly wrong. To teh investor, the company SHOULD = it's dividend stream. The only other mechanism that makes sense is takeover value, but who is buying AMZN or MSFT or scores of other companies with massive earnings, and almost no dividend?
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Buddy, your ideas are to put it bluntly ignorant. Do you even know what a Growth Stock is ? Your "good example" you so dearly require is IN YOUR OWN POST. MSFT is a good example of a company that had many stages of maturity. Now, it is worth a lot of money, but even MSFT has a price below which someone would take it over just to get the guaranteed cash flow every year.
 
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.
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Buddy, Nitro makes NO SENSE PERIOD. Are you really as thick headed as this dimwit Nitro ?

I can very easily find you many basically insolvant companies that pay generous dividends, and on the flip side highly profitable companies that pay very modest dividends. The dimwit can buy the first group.
 
Quote from Nine_Ender:

Buddy, Nitro makes NO SENSE PERIOD. Are you really as thick headed as this dimwit Nitro ? ....
....YaDa, YaDa,...Bitch, Piss Moan,...(Hate The World....I am great....Oh My God What Fools They all are....Don't they see how stupid, ignorant, uneducated, baffoons they all are,....Why do I waste My Time Here),....YaDa,....
....
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You really need a psychiatrist Nine_Ender
 
Quote from asynchronous:

You really need a psychiatrist Nine_Ender
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Sorry I interrupted your "Flat Earth Society" discussion.
I got confused and thought this was an investment site where most contributors had some semblence of rudimentary knowledge in the field.
 
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