Quote: (01-28-2014 01:13 AM)worldwidetraveler Wrote:
Hey T and A Man,
Quote: (01-28-2014 12:33 AM)T and A Man Wrote:
To instill inflation means poor performing companies get rewarded too. it is in noone's best interests to have that.
I would be surprised if a company was able to stay afloat solely based on inflation.
Well in Australia for example, we have a compulsory superannuation system, similar to 401k. Much of it is is equity based investment.
The top 8-10 stocks of our stock exchange comprise around 50% of its the total ASX's market cap.
In other words, compusory money is pumped into these stocks continuously. It does mask poor performance.
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I mean, you said it yourself, people have to invest into something otherwise their cash erodes in value. If there was no erosion, there would be no need to invest.
It's called greed. People wil invest because they want more.
Bonds return a coupon, companies return a dividend.
I agree and mentioned greed when it came to certain bubbles. That comment was in response to SpecialEd stating no one would invest in stocks if it wasn't for it being pegged to inflation.
If he was to rephrase it as people would re-evaluate stocks vs bonds in the absence of inflation, would that makes more sense?
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Still, greed based investing tends to be short term from what I have seen. Most want to get in and get out which doesn't really help anyone.
Greed is just wanting more. If greed is the motive, but can be contained to not influence sound investment decisions, it is then benign.
People will always want more, they don't need stocks prices linked to inflation to obtain it.
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Not all companies pay a dividend.
They are companies that serve different purposes in a portfolio, however I'll concede that, and reclassify it as ROE.
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Erhh, there are very few companies that don't have debt. Companies actually prefer debt because its cheaper than equity. However, lenders insist on equity ratios, thus companies have to go that way at time.
I would say that depends on why the company needed a cash infusion.
They don't, it's just called leverage. If debt is cheaper than equity, yuo get debt. It's just you can't really get 100% unsecured debt funding.
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I could see taking on debt for things like production increases to meet demands. For me, I wouldn't want to be saddled with too much debt unless there was an immediate boost to my bottom line.
Bankers/lenders do to, that's why they insist on equity ratios, so losses come out of equity.
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If you look at a company like Amazon. Focusing on growth and not profits allowed them to grow fast which kept competitors from sneaking up on them. That is the problem with some markets, the barriers of entry are small and if you show something to be successful the clones come out very quickly.
Umm, that's not a 'problem', that is what we all want fro our market system.
Amazon, like all companies, will stop growing fast one day. When it does, that's when dividends occur.
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Doing so completely on debt would have been a disaster, imo.[/qute]
It'd be cheaper, its just what type of loss(es) do bonds holders expose themselves to. It's one of the reasons equity pays more, more risk.
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Besides, I wouldn't invest in a company with too much debt.
You'd have to be wondering about a company too little either, before investing in it.
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And in regards to paying for equity, in a no inflationary environment, equity would just have to pay a different premium.. in other words, pay the proper price.
Having people be forced to chase equity to hedge against inflation means they are captive, and thus the price paid for equity will probably be lower than it should be.
Sorry, I didn't understand why it would be lower if more people are actively investing.
If people aren't defaulting to inevsting in stocks, out of being forced to hedge inflation, then investing incurs more of an opportunity cost.
In other words, companies have to give a greater incentive, namely more yield. Higher yield means lower stock price.
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It is hard to generalize this since companies are different and the appeal of those companies will be different to investors.
or non-investment.. as I said, opportunity cost.
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In other words, inflation becomes a form of welfare for companies.
I don't see it as welfare unless you were talking about all companies getting the same amount of money without worrying about competition for those investments.
Getting money for nothing is welfare. If asserting my claim about increased yields, then there is a wealth transferance... free money.
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I agree with the premise however, I have found out this more than ever as I now deal with equity raisings in my company.
Good luck with that. Keep us updated, I would be interested to hearing how things go for you.
I'm on the other side, I try to protect my clients from conmen.
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The game is rigged. It is rigged for asset holders, to the detriment of savers and workers.
Agree. Is encouraging people to not sit on their money and invest into assets a bad thing?
if we all endorse having the best party on the titanic yes.
Western civilisation grew to be the best of all time because we all agreed in consensus to make short term sacrifices.
Most westerners here, including the ones that have climbed from poverty, have done so on the back of these communal sacrifices giving opportunity.
It's narcissistic to claim that we all work harder, and are smarter than the Ethiopian farmer, we have socitieis opportunities underwriting much of what we do.
It's quite vivd in the manosphere, particularly the WN's, for many to claim that their success are due to personal exceptionalism, and failures are down to "gum'int!".
It would be as apt to claim their successes are down to "gum'int!", with free secondary education, accessible tertiary education, relatively transparent laws and taxation... and their failures are their lack of personal exceptionalism.
I just guess I got some code of honour I can't get rid of.