[mike777]

barmar, on Oct 16 2008, 09:04 PM, said:

Yeah, shell game was a poor metaphor.  I didn't mean that there's something hidden, just that everything goes round and round in a confusing way.

You mention "buy Hamman, etc.".  Are you thinking about a Calcutta?  When people buy shares of a company, it feels like bidding on players in a Calcutta.  But the difference is that the Calcutta is a finite game: when the tournament ends, the money that was put in is all distributed (except, perhaps, for the house's cut).  If you bought the right players, you make a profit.  But the stock market has no end, it just goes on and on, and the money goes round and round.  But unlike the old song, it never "comes out here".

Again you make an excellent super point! Lol you must really be a super investor!

I buy Hamman and others long term....long term meaning I may die before they do!

Let me use an extreme example....if you can live with the violitity of "JL"...long term you buy...if you cannot you do not buy!

Please note none of the above means JL will not win BB or other..........you just discount back.....and understand your willingness for risk(ups and downs).

[barmar]

cherdano, on Oct 16 2008, 10:04 PM, said:

barmar, on Oct 16 2008, 07:18 PM, said:

In some cases the company pays dividends, i.e. you get a share of the profits the company is making.  But these days, I think this is relatively rare, so I don't consider it a big factor in stock investing.

The value of a stock is still the sum of all future dividends (interest-rate adjusted, of course). If a company makes a profit but doesn't pay a dividend, you should think of the shareholders reinvesting the profit into the company in order to increase future profits, and thus dividends.

The expect growth of profits in the future is much more relevant to the stock price than this year's profits, and dividends.

But many companies NEVER pay a dividend. I suppose you're betting that eventually the company will get big enough that it can afford to share its profits with investors.

The comment about "buying Hamman" has got me thinking some more. Suppose there were a stock market for bridge pros. One way it could work is if shareholders received a portion of the fees as dividends. Or, the pro could put in his will that the shareholders will inherit his estate; that's the liquidation model. In either case, the pro could set his rates based on his share price, and investors would set their share prices based on how much they think the pro can attract in rates; it circular logic!

But again, the difference between this and the real stock market is that you know the pro will eventually die, so it's still a finite game. Good companies, on the other hand, are expected to live on forever, either on their own or by being absorbed into some other company. We buy shares, but never actually expect to get our piece of the pie.

The stock market seems like this: Suppose you and a bunch of friends each put in a couple of bucks, planning to buy a pizza. But instead, one guy takes the money home, and promises that the next time you all get together he'll buy the pizza. When that day comes, someone takes the money from him, promising that he'll buy dinner the next time. And so on and so on. Money is going around and around, but no one gets to eat!

[mike777]

cherdano, on Oct 16 2008, 09:04 PM, said:

barmar, on Oct 16 2008, 07:18 PM, said:

In some cases the company pays dividends, i.e. you get a share of the profits the company is making.  But these days, I think this is relatively rare, so I don't consider it a big factor in stock investing.

The value of a stock is still the sum of all future dividends (interest-rate adjusted, of course). If a company makes a profit but doesn't pay a dividend, you should think of the shareholders reinvesting the profit into the company in order to increase future profits, and thus dividends.

The expect growth of profits in the future is much more relevant to the stock price than this year's profits, and dividends.

I agree if you have a math model that tells me future profits....that justifies my risk. Please post ")



I do not want to buy lehman or AIG or etc that have truncated.....dividend payouts

[Lobowolf]

mike777, on Oct 16 2008, 08:59 PM, said:

2) "This is the theory behind "value investing", where you invest in companies whose market value is less than the presumed value of their assets. But who really invests in companies that they want to fail so that they'll be liquidated?"

But if you know any companies such as this tell............so I can buy them!

Wasn't quite there, but I bought Apple Computer at $16/share when they had about $11/share ($4 billion or so with 375 million shares outstanding) in cash sitting in the bank. They had some long-term debt at the time, but much less than the cash on hand. Less than a billion in long-term debt, as I recall.

[mike777]

Lobowolf, on Oct 16 2008, 09:29 PM, said:

mike777, on Oct 16 2008, 08:59 PM, said:

2) "This is the theory behind "value investing", where you invest in companies whose market value is less than the presumed value of their assets. But who really invests in companies that they want to fail so that they'll be liquidated?"

But if you know any companies such as this tell............so I can buy them!

Wasn't quite there, but I bought Apple Computer at $16/share when they had about $11/share ($4 billion or so with 375 million shares outstanding) in cash sitting in the bank. They had some long-term debt at the time, but much less than the cash on hand. Less than a billion in long-term debt, as I recall.

lol I just bought a couple of companies that have more cash....than total.......value of company....

hmm today they went down

I did not buy Apple but your point is valid.....I do not understand tech companies..I do not own an Iphone let alone a cell/mobile phone.

[barmar]

Just as an example, Microsoft went public in 1986, but didn't start paying dividends until 2003.

Microsoft's dividend is currently $0.13 per quarter. If you bought at today's closing price, you'd have to get dividends at this rate for about 50 years to get back your investment.

[mike777]

"But many companies NEVER pay a dividend. I"

Again a super point



First off I grant Math majors know more about this..alot more than me.
As a finance major if a company never pays a dividend, in the broad sense of the word, the company is worth zero! Maybe you can make a profit from shorting it...ok!

[mike777]

"But again, the difference between this and the real stock market is that you know the pro will eventually die, so it's still a finite game. "


Ok here we disagree I do not see the stockmarket as a finite game......I may die charities/family(given money) go on.......well..........I win!

[mike777]

"Just as an example, Microsoft went public in 1986, but didn't start paying dividends until 2003.

Microsoft's dividend is currently $0.13 per quarter. If you bought at today's closing price, you'd have to get dividends at this rate for about 50 years to get back your investment. "



LOL you keep making super points! We can all disagree at the margins but lol........you make great points