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This is slightly specious. There is an expectation that AMZN or GOOG will eventually issue dividends or repurchase shares, and there's noting fundamentally prev

This is slightly specious. There is an expectation that AMZN or GOOG will eventually issue dividends or repurchase shares, and there's noting fundamentally preventing them from doing so. There's no way to form a valuation otherwise.

deleted 9y ago
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gfodor 9y ago
"Expectation" means that there is some probability <1 that they will return cash to investors on any given day. You have a finite time alive. It's not academic to conjecture that there's a very high probability that you, as an investor, will never see a yield on the capital of your investment. If you knew with 100% there will never be a buyback or dividend by AMZN while you are a holder of their stock, arguably you are making the same trade as someone buying bitcoin or gold: expecting someone else to come along (who perhaps expects to have a longer lifespan) to pay you more for the stock than you did. Note: I am not arguing that buying AMZN is a bad idea, I am saying that the argument that there is no "underlying rate of return" for bitcoin is a poor argument coming from someone who is also telling investors to buy those stocks, many of whom will certainly never see direct yield on their investment, just capital gains.
- longerthoughts 9y ago
  >arguably you are making the same trade as someone buying bitcoin or gold I think the difference here is that people can intuitively justify changes in the value of a stock regardless of buybacks and dividends because company performance is a tangible, measurable factor (even if only by proxy of flawed but useful metrics). The value of gold is more vaguely determined by market perception/speculation (e.g. gold doesn't have quarterly earnings reports with detailed accounting). Ultimately something has value as long as people believe it has value, but I think the discomfort from folks like Bogle comes from the lack of a rigorous method for valuation vs. assets like equities.

deleted 9y ago

[deleted]

gfodor 9y ago

"Expectation" means that there is some probability <1 that they will return cash to investors on any given day. You have a finite time alive. It's not academic to conjecture that there's a very high probability that you, as an investor, will never see a yield on the capital of your investment. If you knew with 100% there will never be a buyback or dividend by AMZN while you are a holder of their stock, arguably you are making the same trade as someone buying bitcoin or gold: expecting someone else to come along (who perhaps expects to have a longer lifespan) to pay you more for the stock than you did. Note: I am not arguing that buying AMZN is a bad idea, I am saying that the argument that there is no "underlying rate of return" for bitcoin is a poor argument coming from someone who is also telling investors to buy those stocks, many of whom will certainly never see direct yield on their investment, just capital gains.

longerthoughts 9y ago
>arguably you are making the same trade as someone buying bitcoin or gold I think the difference here is that people can intuitively justify changes in the value of a stock regardless of buybacks and dividends because company performance is a tangible, measurable factor (even if only by proxy of flawed but useful metrics). The value of gold is more vaguely determined by market perception/speculation (e.g. gold doesn't have quarterly earnings reports with detailed accounting). Ultimately something has value as long as people believe it has value, but I think the discomfort from folks like Bogle comes from the lack of a rigorous method for valuation vs. assets like equities.