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Exactly. And we should just stop calling them "Value" investors. This is true for growth investors, any kind of investors, in fact all investors. Investing i
by nirvana 14y ago
Exactly. And we should just stop calling them "Value" investors. This is true for growth investors, any kind of investors, in fact all investors.
Investing is about knowing the difference between value and the price.
When you can do that-- and when I say "knowing" I mean it, and I have a spreadsheet to calculate it-- then you can buy low and sell high.
The problem is wall street is in the business of managing other people's money and most people are ignorant of money, so you have a lot of people who just turn their money over to others to "manage"... and many of those that use other people's money end up gambling with it rather than investing it... this problem is compounded by the moral hazard created by the government bailing these companies out when the gambles turn south (or underwriting the gambling by buying bad securities as helicopter ben is doing right now to the tune of $40B a month.)
The problem with wall street is government regulation which is idiotically designed, and intervention-- in the form of bailouts-- that perverts the entire system incentivizing gambling.
And the people voting for all this, generally don't even know what money is, let alone how to invest it. (If you think the dollars in your pocket are money, then you're one of those people, and I suggest you read http://mises.org/money.asp http://mises.org/money.asp )
- lifeisstillgood 14y agoIf you walking into the saloon ready to play poker the proper way (you know, 5 cards, held in your hand) and every game at every table is mucking around with Texas Hold 'em, it's no good saying you know the real value of poker - even if you are right, and value is written into your spreadsheet. Never ignore Keynes' rule - the markets can stay irrational longer than you can stay solvent.
- btilly 14y agoIf you are able to afford to buy and hold, then it does not matter how long the markets stay irrational - you've bought it and it should work out. Where Keynes' rule applies in spades is when you are doing things like shorting an overpriced stock. Now as the price goes up you keep on having to put more money in, and should you run out of money you lose your shirt. And about poker, there are a lot of variants of poker out there. Texas Hold 'em is what everyone is playing because it has the combination of more strategy and thinner edges. So good players have a real challenge figuring it out, and weaker players have a better chance of walking away lucky on any given night.
- prodigal_erik 14y agoWithout dividends, there's no reward for buy-and-hold investing, and no reason to pick companies that will actually perform well. Instead anyone who buys is gambling that they'll be able to dump their position at a fortunate time, which leaves them dependent on predicting the irrational market's perception of the company's prospects.
- yummyfajitas 14y agoUnfortunately dividends are double-taxed relative to cap gains/interest/etc. Until that's fixed, we won't go back to the era of companies returning money to investors.
- btilly 14y agoCompanies can and do return money to investors through stock buybacks. To first order, it is the same as a dividend, except that only the investors who want money get it.
- yummyfajitas 14y agoTo first order, stock buybacks are equivalent to dividends. To second order, the IRS makes it complicated, as do regulators.
- lifeisstillgood 14y agoWhat - really double taxed ? Do you mean dividends are paid out of post tax cash, then taxed as income for the stockholder? Just wondering
- aaronbrethorst 14y ago> The problem with wall street is government regulation which is idiotically designed, and intervention-- in the form of bailouts-- that perverts the entire system incentivizing gambling. Deregulation. http://dealbook.nytimes.com/2009/11/12/10-years-later-looking-at-repeal-of-glass-steagall/ http://dealbook.nytimes.com/2009/11/12/10-years-later-lookin... “Without the...repeal of Glass-Steagall...Washington might not have felt a need to rescue the institutional victims.”