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In theory, the price of a stock reflects the market's expectation of future dividends. In practice, the market expects lots of things that aren't true.
by iaabtpbtpnn 8y ago
In theory, the price of a stock reflects the market's expectation of future dividends. In practice, the market expects lots of things that aren't true.
- Gibbon1 8y agoI've come around to the idea that stocks have an intrinsic value as collateral/store of value. I saw that with a family that owned a condemned property. They couldn't rent it but they sure could borrow against the land price (ever rising) minus the cost of demo'ing the old building. I also think stocks tend to keep up with/beat inflation and thus are better than cash as a store of value.
- dredmorbius 8y agoBingo. So long as asset value inflates, it's good for cash via loans. The moreso if asset inflation > nominal interest rates.
- umanwizard 8y agoThe expectation doesn't have to be a certainty for this to make sense. If there is an 0.01% chance of paying $10,000 dividend, or 100% chance of paying $1 dividend, the expected payout is the same.