Heading off to east central Ohio to visit relatives & help out my home town.
Government is part of the problem at all levels. The foolishness of the people running the government and their waste and favoritism puts private people in cement overshoes. Let's get rid of half of it.
Monday, March 26, 2012
Monday, March 12, 2012
Only Dividends Matter
Your writer will take a reactionary stance here, contrary to most modern finance theory.
For the long term investor, only dividends matter for the value of a stock.
I chose that terminolgy for the reason that there is a "theorum" taught in business schools and by finance academics that dividends don't matter. They are totally wrong.
A simple gedanken experiment proves my case. Suppose you buy the IPO of a stock, such as GM, EK (Eastman Kodak), or AAPL and, as a long term investor, simply hold on to it ... to the bitter end.
What money do you ever receive? The "bitter end" - the eschaton of stock investing - is either a cash buyout or bankruptcy. All cash buyouts are pretty rare nowadays. Can anyone name one in the past few years? Bankruptcies are much more common: GM, EK, etc.
Suppose the firm never pays a dividend. If the end result is bankruptcy, the value of a long string of zeroes is ... a big zero.
Suppose the firm pays dividends. Then even if the end result is bankruptcy, the long term investor has received some value that he can reinvest in bonds or other stocks.
Over the long term, the bankrupcty of firms is rather common. Management squanders cash and makes bad investments. How we can marvel at the recurring "non-recurring" losses!
They buy back stock. That only benefits the sellers by propping up their selling price. Who is a seller? For one, management is. They use stock buybacks to prop up their pay.
Why is AAPL stock apparently undervalued? No dividend. They have a huge and growing hoard of cash. The "market" obviously thinks management will squander it. And continue to squander it.
GE bought back huge amounts of stock while the price was high. And then proceeded to sell huge amounts when the price was low during and after the Panic of 2008. Buy high, sell low - brilliant management. Dopes? No, self-serving hogs!
Long term investors should only pay for dividends. Period. Full stop.
For the long term investor, only dividends matter for the value of a stock.
I chose that terminolgy for the reason that there is a "theorum" taught in business schools and by finance academics that dividends don't matter. They are totally wrong.
A simple gedanken experiment proves my case. Suppose you buy the IPO of a stock, such as GM, EK (Eastman Kodak), or AAPL and, as a long term investor, simply hold on to it ... to the bitter end.
What money do you ever receive? The "bitter end" - the eschaton of stock investing - is either a cash buyout or bankruptcy. All cash buyouts are pretty rare nowadays. Can anyone name one in the past few years? Bankruptcies are much more common: GM, EK, etc.
Suppose the firm never pays a dividend. If the end result is bankruptcy, the value of a long string of zeroes is ... a big zero.
Suppose the firm pays dividends. Then even if the end result is bankruptcy, the long term investor has received some value that he can reinvest in bonds or other stocks.
Over the long term, the bankrupcty of firms is rather common. Management squanders cash and makes bad investments. How we can marvel at the recurring "non-recurring" losses!
They buy back stock. That only benefits the sellers by propping up their selling price. Who is a seller? For one, management is. They use stock buybacks to prop up their pay.
Why is AAPL stock apparently undervalued? No dividend. They have a huge and growing hoard of cash. The "market" obviously thinks management will squander it. And continue to squander it.
GE bought back huge amounts of stock while the price was high. And then proceeded to sell huge amounts when the price was low during and after the Panic of 2008. Buy high, sell low - brilliant management. Dopes? No, self-serving hogs!
Long term investors should only pay for dividends. Period. Full stop.
Monday, March 5, 2012
Poor Leadership
Bad decisions by the leaders of a strong nation weaken it massively, leading to a future downfall. History of great nations of the past shows this.
Read the history of the East Roman Empire, aka Byzantium. That nation had two falls. The first occurred circa the years 560-630 after Justinian bankrupted the Empire with endless wars. The East Roman empire was weakened by the debts, had a short reprieve but was further weakened in another war, then proceeded to lose huge swaths of territory to the Arab invaders in the east and Slav invaders in the west as its poor leaders and weakened army lost battle after battle against enemies it could have easily crushed in its heydays.
The second occurred in circa 1025-1072. The successors of Basil II reversed his decisions that aided the common farmer and small landholders. The aristocracy was permitted to gobble up huge swathes of land and reduced the people to serfdom. Thus the backbone of a loyal army was gutted. The army then was forced to rely on mercenaries who were unreliable in key battles, including the disaster of Manzikert in 1072. Further civil strife led the Seljuk Turks to occupy the crucial territory of central Anatolia. After that, the Byzantine Empire was trying to survive with one arm - its Balkan territory. Without the diversity of two economic bases, the Byzantine Empire, which at the time was far advanced technologically and economically over any empire or nation within thousands of miles, was mortally weakened.
Third, consider the great nation of Poland. In the 17th century, Poland was one of the largest and most powerful nations in Europe. Its aristocracy destroyed its unity in their greed for more power and land. Poland began a one way path to oblivion and partition.
What about America?
We have a huge debt still increasing; the money is being wasted and not spent on national improvements. We are being weakened by endless wars in parts of the world mostly irrelevant to American interests. The billionaires, CEOs and government bureacrats and thier allies grab more and more while the living standards of the common people are stagnant, National "leaders" bicker and fight for their own power while ignoring the needs of the common people.
Our only hope: the people will choose wisely ... soon. We need true leadership, a 21st century Teddy Roosevelt who will give the common man and woman a square deal, beat back the power of the Ruling Classes and their Pharisee allies, and stop fighting pointless wars that only enrich the military-industrial complex.
Read the history of the East Roman Empire, aka Byzantium. That nation had two falls. The first occurred circa the years 560-630 after Justinian bankrupted the Empire with endless wars. The East Roman empire was weakened by the debts, had a short reprieve but was further weakened in another war, then proceeded to lose huge swaths of territory to the Arab invaders in the east and Slav invaders in the west as its poor leaders and weakened army lost battle after battle against enemies it could have easily crushed in its heydays.
The second occurred in circa 1025-1072. The successors of Basil II reversed his decisions that aided the common farmer and small landholders. The aristocracy was permitted to gobble up huge swathes of land and reduced the people to serfdom. Thus the backbone of a loyal army was gutted. The army then was forced to rely on mercenaries who were unreliable in key battles, including the disaster of Manzikert in 1072. Further civil strife led the Seljuk Turks to occupy the crucial territory of central Anatolia. After that, the Byzantine Empire was trying to survive with one arm - its Balkan territory. Without the diversity of two economic bases, the Byzantine Empire, which at the time was far advanced technologically and economically over any empire or nation within thousands of miles, was mortally weakened.
Third, consider the great nation of Poland. In the 17th century, Poland was one of the largest and most powerful nations in Europe. Its aristocracy destroyed its unity in their greed for more power and land. Poland began a one way path to oblivion and partition.
What about America?
We have a huge debt still increasing; the money is being wasted and not spent on national improvements. We are being weakened by endless wars in parts of the world mostly irrelevant to American interests. The billionaires, CEOs and government bureacrats and thier allies grab more and more while the living standards of the common people are stagnant, National "leaders" bicker and fight for their own power while ignoring the needs of the common people.
Our only hope: the people will choose wisely ... soon. We need true leadership, a 21st century Teddy Roosevelt who will give the common man and woman a square deal, beat back the power of the Ruling Classes and their Pharisee allies, and stop fighting pointless wars that only enrich the military-industrial complex.
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