Investing Catechism

nitro · Mar 26, 2011

Insurance companies as the biggest scams in the world on an unsuspecting public. I am not surprised that these stocks just keep going higher. Every entrepreneur on the planet should be thinking how to compete in this space. It requires nothing but statistics, modest advertising, and probably a modest amount of seed money to start. Then just rake in the cash by beating the likes of AFL and GEICO State Farm AIG etc etc etcby wide margins, and you still make a fortune.

This is one area where capitalism fails. In a truly capitalist economy, insurance companies would be like PC makers or banks, one on every corner it is that profitable and the margins are insane.

Quote from trendlover:

Here is one comment from the post.

"Great article, Marc. If there's any doubters out there still, let me give you a real world example. I invested $5,000 in AFL in 1990 and reinvested all dividends. Through stock splits, dividend increases and adding a few shares when I had some extra cash, that value is well over $1 million today.

Along with other investments and a healthy 401(k) that I can raid at age 59.5, I was able to retire at 40. Fortunately, I received advice similar to this article when I was 22 and followed-up on what I was advised to do. Yea, I made a few sacrifices over the years, but now it pays off every morning the alarm clock doesn't ring. Mar 26 11:05 AM Reply +50"

So when he is 22 years old he start and reinvest dividends.

sprstpd · Mar 26, 2011

Quote from nitro:

Apple is the one stock that is sky high that can justify this stock price or even higher,but even AAPL will need a miracle to continue their pace of innovation. The rest are on thin ice.

AAPL is also one of the very very very VERY few stocks that I don't mind that don't pay a dividend because they spend on staff - the management doesn't line their own pockets with money. You work at AAPL to change the world. Walk into any AAPL store and look at the army of blue shirts with apple logo on them. These people hire like mad to make sure your customer experience is excellent. And their training is outstanding. They just do everything right man.

I want a matt-screen version of the iPad, please

What complete hogwash. Now you are saying its okay to own Apple even though it doesn't pay a dividend? Considering what you have consistently said this entire thread, it seems like you are trying to have it both ways. Your argument has no merit.

nitro · Aug 2, 2011

I wonder how much of corporations stronger earnings in recent years is due not to stronger sales, but simply removing things like pension plans:

http://www.time.com/time/magazine/article/0,9171,1929233,00.html

nitro · Aug 12, 2011

The corporate bond market is what I should have given as an alternative to the common. It is one way you can skirt the stock price altogether. The downgrade of the US should cause everyone's rates to borrow a bit higher, giving the investor more yield. I don't know if this happened or not. It is hard to see because there are so many bonds and so many companies...

Nine_Ender · Aug 14, 2011

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 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.

Nitro, you are truly one of the most uneducated frequent posters on this site, but its much more clear now what we are dealing with. Three separate ridiculous theories spanning over two years and you haven't learned a thing on any of them.

Theory #1 : Your whole Dividends in everything thread here.
A dead give away you don't understand that equities
represent ownership and what growth stocks really are.

Theory #2 : That making 20% per annum on conservative
Mutual Funds is easy.

Theory #3 : Your model setting a future value on US markets
that is obviously deeply flawed.

Honestly, the extent that you'll follow these wacky theories is a sight to behold.

nitro · Sep 14, 2011

nitro · Sep 14, 2011

The whole notion that you can't innovate without cash is absurd. I have no idea where people get this stuff. It has become its own myth. What cash did AAPL have when it innovated with the Apple 2?

A dividend gives investors the chance to buy a put and in essence gives you a synthetic call on a stock. So one can argue that when the company gives a dividend, it is short its own stock. The way around this is to both buy back stock and offer a dividend.

newwurldmn · Sep 14, 2011

Quote from nitro:

A dividend gives investors the chance to buy a put and in essence gives you a synthetic call on a stock. So one can argue that when the company gives a dividend, it is short its own stock. The way around this is to both buy back stock and offer a dividend.

What are you talking about?

Companies buy back stock or issue dividends because they have excess cash and want to return it to shareholders. How is declaring a dividend shorting their own stock?

Companies short their own stock by offering more of it in the market. They do this because they have to or because they can use the cash to create more wealth.

trendlover · Sep 14, 2011

Quote from nitro:

<iframe frameborder="0" scrolling="no" marginheight="0" marginwidth="0" width="480px" height="270px" src="http://specials.washingtonpost.com/mv/embed/?title=Lamba%20Expects%20Apple%20Dividend%2C%20Buyback%20in%2012%20to%2018%20Months&stillURL=http%3A%2F%2Fwww.washingtonpost.com%2Frf%2Fimage_606w%2F2010-2019%2FWashingtonPost%2F2011%2F09%2F14%2FBusiness%2FVideos%2F09142011-43v%2F09142011-43v.jpg&flvURL=%2Fmedia%2F2011%2F09%2F14%2F09142011-43v.m4v&width=480&height=270&autoStart=0&clickThru=http%3A%2F%2Fwww.washingtonpost.com%2Fbusiness%2Flamba-expects-apple-dividend-buyback-in-12-to-18-months%2F2011%2F09%2F14%2FgIQA3XD2RK_video.html"></iframe>

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He is saying apple have no problem for the demand of thier products. The problem is to produce enough?

nitro · Oct 9, 2011

There is one thing that disturbs me. Take AAPL. Clearly they have great products. They don't pay a penny of dividend. If the stock price does not go up, someone with enough resources can come in and buy all outsanding shares, take control of the company, and get all the revenue for themselves. So the fear of takeover MUST drive a stock price to some level.

What is strange is, that it is up to the market participants to keep the value of a stock at least in some proportion to the cash flow that a company generates, to Book Value + adjustments. It is almost an honor system, since there is no payment to do so in the absence of a dividend. But the company itself relies on the market to keep value!!! It can buy back stock, but how often is that? I guess I don't understand why the stock of a company trades above its book value and future cash flows - the multiple for those earnings. I understand the notion of future cash flows, but the whole thing is circularly recursive, with no sound basis for any of it.