4 ms·

I personally think dividends are a much more sane way to invest than stock price alone. It seems to me that AAPL or GOOG are "priced" by investors mostly based

by dy 16y ago

I personally think dividends are a much more sane way to invest than stock price alone. It seems to me that AAPL or GOOG are "priced" by investors mostly based on archaic ties to dividend models when in fact, it's really just hoping that some sucker down the road will be willing to buy your shares at a higher price. Dividends would allow us to price stocks using metrics tied much closer to the underlying business rather than the perceptions of the business, which in my mind would increase the healthiness of investing overall. I understand the voting/bankruptcy rights of stock, but for most retail investors, it seems to me that holding shares of Apple is really just a large Ponzi-scheme (this has probably been debated on here ad nauseum).

mkramlich 16y ago
I agree that dividends are a healthier and saner way to earn money from investments. The problem is that as a little guy I have no control over whether some company makes a dividend distribution, or even whether they make a profit or not. I can control whether I buy that stock in the first place, and control whether and when I sell that stock. Therefore to make money in this latter scenario, the stock price must change (usually up, but if you're shorting, down can work too) in order for me to make a profit. Thus it's in my best interests for a stock's price to fluctuate, regardless of whether that fluctuation has any relationship to the fundamental health or profitability of the company. It's weird. It's dumb. But that's the way it is. And that's just the incentive for the little guy who's an outside investor. Imagine now you're a big guy with a lot of financial clout, and inside connections, especially as far inside as being on the board or one of the executives. You not only are incented to cause distortions to the stock price, regardless of merit, but you also have greater power over the "upstream" numbers (how to define profit, when to book profits/costs, etc.) and over the media presence and general public's perception of the company. Greater potential upside plus greater power to manipulate, is a recipe for bad things.

by dy 16y ago

mkramlich 16y ago

I agree that dividends are a healthier and saner way to earn money from investments. The problem is that as a little guy I have no control over whether some company makes a dividend distribution, or even whether they make a profit or not. I can control whether I buy that stock in the first place, and control whether and when I sell that stock. Therefore to make money in this latter scenario, the stock price must change (usually up, but if you're shorting, down can work too) in order for me to make a profit. Thus it's in my best interests for a stock's price to fluctuate, regardless of whether that fluctuation has any relationship to the fundamental health or profitability of the company. It's weird. It's dumb. But that's the way it is. And that's just the incentive for the little guy who's an outside investor. Imagine now you're a big guy with a lot of financial clout, and inside connections, especially as far inside as being on the board or one of the executives. You not only are incented to cause distortions to the stock price, regardless of merit, but you also have greater power over the "upstream" numbers (how to define profit, when to book profits/costs, etc.) and over the media presence and general public's perception of the company. Greater potential upside plus greater power to manipulate, is a recipe for bad things.