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Old 11-21-2022, 09:46 PM   #61
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But you have to sell them eh?
So the div stock has to distribute them, eh?

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Old 11-25-2022, 08:09 AM   #62
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The only actual way you can milk the company is if the company pays a dividend to you for owning the stock.

All of this makes me wonder if the only true investment is a dividend paying stock and all the non-dividend stocks are either a Ponzi scheme or gambling.
For a long time, your "only actual way" was the general principle for valuing stocks (or other types of investments). Any other way was susceptible to pump-and-dump. Only with the advent of regulated securities and accounting methods did the current idea of valuing a company based on its assets and earnings become the norm -- sometime in the 1950s, I think.
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Old 11-25-2022, 09:19 AM   #63
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Maybe this should be in the "pet Peeve" thread, but it bugs me that "Ponzi Scheme" is used generically for any sort of fraud.

See wiki:

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A Ponzi scheme (/ˈpɒnzi/, Italian:*[ˈpontsi]) is a form of fraud that lures investors and pays profits to earlier investors with funds from more recent investors
A Ponzi scheme will blow up at some point. And, there is zero evidence that stocks are making dividend payments, and/or growing their value by distributing funds from the early investors.

There's just no way stocks have been on this run for way over 100 years if it was a Ponzi scheme.

You can run a Ponzi on one person (for a while). Promise 20% safe annual returns on a $100,000 investment. Take the $100K, after a year pay a $20,000 dividend. Investor is happy. Do it again next year. Then take off with the remaining $60,000.

Of course, a real Ponzi operator will drag more people into the scheme, with the early investors telling them it is for real, they get their 20% every year! Come on in, the water's fine!

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Old 11-25-2022, 09:53 AM   #64
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Maybe this should be in the "pet Peeve" thread, but it bugs me that "Ponzi Scheme" is used generically for any sort of fraud.

-ERD50
+1

So many misused words...a general lack of context/history/English. (moot vs mute comes to mind)

As they said on the "Princess Bride" : 'I don't think that word means what you think it means'.

Disclaimer: My oft-mentioned grandfather actually met Mr. Ponzi.
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Old 11-25-2022, 04:30 PM   #65
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Pretty much. Need to know when to get in and out.
Or just let it ride and never use it. Claiming victory.
Or bypass it all together in retirement.
Who needs the added drama. "Ain't nobody got time for that".
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Old 11-25-2022, 05:01 PM   #66
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Simply put, NO... Any company is potentially capable of unscrupulous financing practice, but stocks have been providing great financial returns for generations.
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Old 11-25-2022, 05:12 PM   #67
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So is my example. A stock that earns 4% and pays it out in divs, vs a stock that earns 4% and retains that value on its books.

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Is it always "guaranteed" that if a company retains the exampled 4% that the stock will increase by 4%? I've observed companies cutting divs and going down in price. And the opposite.
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Old 11-25-2022, 05:56 PM   #68
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... stocks have been providing great financial returns for generations.
Yes. For investors. For traders, not so much.

IMO it is people who conflate investing with trading who see the market as a casino. Over trading time frames it is a casino.
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Old 11-25-2022, 06:12 PM   #69
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Yes. For investors. For traders, not so much.

IMO it is people who conflate investing with trading who see the market as a casino. Over trading time frames it is a casino.
Could you be more specific? What is the duration of "trading time frames?"
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Old 11-25-2022, 06:31 PM   #70
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Could you be more specific? What is the duration of "trading time frames?"
I think five years is generally considered to be the minimum time frame for an investor, though if you look at historical trends you could argue for ten.

You can look at the length of most bubbles (tech bubble, RE bubble, etc.) as maybe illustrations of traders' time frames. In very recent history, ARKK's portfolio and its own meteoric rise then spin, crash, and burn is maybe another illustration. That took a couple of years.

Another way to look at it is through the S&P SPIVA reports. Beginning around five years of history the number of successful traders (the ones beating their benchmarks) is substantially diminished. By ten years, only a single digit percentage of traders have been lucky enough to beat. For "their benchmarks" substitute "a passive portfolio."

As Warren Buffet observed: “The stock market is a device for transferring money from the impatient to the patient.”
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Old 11-25-2022, 07:41 PM   #71
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Is it always "guaranteed" that if a company retains the exampled 4% that the stock will increase by 4%? I've observed companies cutting divs and going down in price. And the opposite.
There are always outside influences in the real world. But conceptually, and I think it has been shown on average in studies of real life (with enough samples to filter out the noise), that it does happen that way.

Again, I'm speaking in terms of the concept, and "all else being equal".

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Old 11-25-2022, 07:57 PM   #72
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Concept? Book value?

None of these have anything to do with share prices which are "market value" and subject to change like the Kardashians.
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Old 11-25-2022, 09:01 PM   #73
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Concept? Book value?

None of these have anything to do with share prices which are "market value" and subject to change like the Kardashians.
Yes, it's a concept - how else can you try to understand something like this? What's the problem?

Life is not a laboratory or a Petri dish. You won't find two stocks in the real world that are identical in every way except that one pays a div, and the other retains it. That doesn't invalidate the concept.

Would you agree that for a poorly insulated house in the Midwest, adding insulation should improve the heating/cooling bill? That's a valid concept, right? But.... in real life. the price of the utilities change, the weather changes, and use patterns change. The heating/cooling bill could increase after adding insulation. That doesn't invalidate the concept either.

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Old 11-26-2022, 08:44 AM   #74
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Is it always "guaranteed" that if a company retains the exampled 4% that the stock will increase by 4%? I've observed companies cutting divs and going down in price. And the opposite.
I know if you're thinking of this one way, it's hard to see it another. Let me try to make it easier to see:

If Johnson and Johnson was at $100/share and paid a $3 dividend, with zero trading going on, the stock price would drop to $97.
If Johnson and Johnson was at $100/share and paid no dividend, with zero trading going on, the stock price would stay at $100.

In both scenarios, you end up with $100. It doesn't matter if it's 1 share at $100, or 1 share at $97 and $3 cash. The actual paying of the dividend is a zero sum event to your wallet. There are internal reasons for a company to pay a large dividend or not varied, but the immediate result for you is the same.
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Old 11-26-2022, 01:31 PM   #75
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I know if you're thinking of this one way, it's hard to see it another. Let me try to make it easier to see:

If Johnson and Johnson was at $100/share and paid a $3 dividend, with zero trading going on, the stock price would drop to $97.
If Johnson and Johnson was at $100/share and paid no dividend, with zero trading going on, the stock price would stay at $100.

In both scenarios, you end up with $100. It doesn't matter if it's 1 share at $100, or 1 share at $97 and $3 cash. The actual paying of the dividend is a zero sum event to your wallet. There are internal reasons for a company to pay a large dividend or not varied, but the immediate result for you is the same.
+1

What's more important is whether the dividend-paying company makes enough profits to pay the dividend and still have enough leftover to sustain the operation.

Meanwhile, the non-paying company must have similar profits, and then instead of paying dividends it retains the earnings to invest in the right projects to grow in the future.

A dying dividend-paying company will stop distributing the dividend when its coffer gets empty and not replenished.

A growth company may invest in bad projects that go nowhere and waste all that good money.

This means one cannot look at the dividend to determine the prospect of the company.
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Old 11-26-2022, 02:22 PM   #76
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+1

What's more important is whether the dividend-paying company makes enough profits to pay the dividend and still have enough leftover to sustain the operation.

.
There's a number of different websites where you can determine the dividend payout ratio. Dividend payout ratio is the amount of dividends paid vs net income. From there you can often glean how stable the dividend is. I find it useful for some of the more obscure stocks but staying with the old faithfuls is generally a better route.
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Are Stocks a Ponzi Scheme?
Old 11-26-2022, 03:33 PM   #77
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Are Stocks a Ponzi Scheme?

Having worked (in leadership positions) for several of the S&P 500 companies over the last 20+ years (as well as some mid and small cap companies), I can tell you that EVERYTHING publicly traded companies do is based on one primary objective… “what do we need to do to increase revenue and make our shareholders happy/richer - which includes our executives and our employees”?

This is especially true in every S&P 500 company I’ve worked for or spoken with, which is why a huge percentage of my NW is in VOO.

People who think the stock market is a Ponzi scheme do not truly understand that you are buying a portion of each company you invest in…. And let me tell you the big companies are laser focused on ensuring that their shareholders (which include themselves) are gonna get the best long term benefits of holding those shares of stock.

Most of my compensation and the reason why I was able to retire at 49 was due to companies granting me shares of stock in their company.
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Old 11-26-2022, 03:39 PM   #78
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^^^^^
In my day, I worked for 2 of the fortune "10" companies. Profits, stock price and share holder dividends where always at the top of their list. Management benefits/compensation was a close second, followed by the rest of the employees... Oh, then came customers and everything else.
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Old 11-26-2022, 04:36 PM   #79
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Stock investing is not a Ponzi scheme. However, there's a thing called a "stock bubble", and that's a different matter.

It's not different than a home having a true intrinsic value, yet a lot of people have lost their shirt (and pants) in a housing bubble.
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Old 11-26-2022, 06:39 PM   #80
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^^^^^
In my day, I worked for 2 of the fortune "10" companies. Profits, stock price and share holder dividends where always at the top of their list. Management benefits/compensation was a close second, followed by the rest of the employees... Oh, then came customers and everything else.
Our CEO used to say that "CEO" stood for Customers, Employees and Owners (shareholders). And he meant it!
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