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ranbo das posted:Amazon has been pretty much up and to the right (minus that business around 2001) Growth companies are valued for their growth, not predictable returns. E: I should have showed their small profits over most of their business life to illustrate the reinvestment approach the business took vs paying a dividend. Big Ass On Fire fucked around with this message at 17:27 on Jan 23, 2024 |
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Jan 23, 2024 17:14
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Foxfire_ posted:One level abstracted from that is something like Amazon. They've never issued a dividend and aren't likely to do so in the near future. They still make profit from selling stuff, but plow it back into new business areas of varying dubiousness/quality. The root stock buying argument is "Even though they aren't going to pay me anything right now, they will eventually run out of new areas to exploit and start paying a dividend (even if that's 30 years from now). I think that eventual dividend will be so big that it's still worth it to tie up my cash in shares without getting anything in the short term". Related to that argument is "I don't think Amazon will start paying dividends before I need this cash back. But they will get bigger/closer to that point in the meantime, so the value of a share will go up and I can sell it to someone else who is willing to keep waiting". There is a mechanism for owning stock to generate payments that doesn't require finding a bigger sucker. This post answered a fundamental economics question I've been trying to get people -- including professional economists -- to explain to me for over 2 decades! Thank you! Foxfire_ posted:Bitcoin, on the other hand, has no actual economic activity. Outside of a handful of weirdos, nobody wants bitcoin for its own sake (can't pay taxes with it, can't buy anything with it). There's nothing driving bitcoin to be any particular price (compare to the General Mills case where 'how much cereal profit/dividend is there going to be each year?' drives the price). If you buy a bitcoin, you're just hoping that there will be greater fools you can unload it to for more. And those people are doing the same, there's no eventual point in the chain where it can stop with someone who wants to hold it for dividend payments generated by actual business profit. This is how I figured all stocks worked in practice: dividends felt like a quaint throwback that nobody actually considered the point of the thing. I'm still convinced this is largely the case, but at least now I understand how people can not think this without being willfully ignorant. Interviewing for a job at a company whose mission was "use computers to trade stocks so fast that we can predict bumps, buy the stock, ride it up for a few seconds, and then sell it again" may have influenced my viewpoint here. cruft fucked around with this message at 17:33 on Jan 23, 2024 |
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Jan 23, 2024 17:31
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individual stocks are very risky unless you are given them as an employee. Even then, it all depends on the strike price when you get them. If you can, do your research and invest in good growth mutual funds. Just don't expect to make any kind of money right way, because all get rich quick poo poo is a scam. e:I was given one thousand shares in my last career and I was able to cash them out because the strike price was lower when I was hired than when I was packaged out. A good company that gives a poo poo about it's employees also gives you a profit sharing bonus every year you are with them. e:I was extraordinarily fortunate to have worked for a company that actually seemed to care about it's employees. tango alpha delta fucked around with this message at 17:42 on Jan 23, 2024 |
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Jan 23, 2024 17:33
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Silly Burrito posted:Don’t you hate when you mishear God?
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Jan 23, 2024 17:43
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Big rear end On Fire posted:Amazon's strategy for a long time was to aggressively reinvest in themselves, prime memberships and video and music content and delivery, distribution centers, delivery services, own product lines, prescription services, etc. I'm not sure what they are targeting next but they have sunk their tentacles into a lot of industry. What juggernaut is even left? Education? Hospitals? Retirement living?
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Jan 23, 2024 17:53
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Amazon is pushing Alexa in retirement homes and stuff so I’m sure them inching towards owning their own chain of retirement homes isn’t too big of a stretch
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Jan 23, 2024 17:58
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Is there a thing that will force Amazon (for example) to start paying dividends at some point? Like, I understand they want to reinvest profits to expand into <whatever> but even if they stop doing that, why would they suddenly start giving their stockholders money? Is there a rule that forces a company to pay X% dividends under certain circumstances that I've never heard anyone mention when they were explaining how stocks work?
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Jan 23, 2024 17:58
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BrewingTea posted:Is there a thing that will force Amazon (for example) to start paying dividends at some point? There's no rule or anything. It's - if you cannot grow but you make a predictable profit, you can return value to your shareholders by buying back shares from the public, which drive up the price, or by paying dividends.
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Jan 23, 2024 18:01
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Ok, but *why* would you buy back shares? It might make the price go up, but that doesn't make *you* money. In fact, it costs you money.
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Jan 23, 2024 18:12
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Sure it makes you money. You (the company) own stock shares that have increased in price.
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Jan 23, 2024 18:18
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BrewingTea posted:Ok, but *why* would you buy back shares? It might make the price go up, but that doesn't make *you* money. In fact, it costs you money. They can turn around and sell it later at a higher price or just be a company which is a more valuable entity for mergers, acquisitions, eventual sale whatever.
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Jan 23, 2024 18:18
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BrewingTea posted:Is there a thing that will force Amazon (for example) to start paying dividends at some point? Theoretically, shareholders could replace the board with a dividend friendly one. I dont think this happens too often, but if a non-dividend paying company was unable to turn profits into growth, it would make sense for shareholders to vote to have profits paid out as dividends instead.
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Jan 23, 2024 18:20
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BrewingTea posted:Is there a thing that will force Amazon (for example) to start paying dividends at some point? Nominally the shareholders. As owners of the company they can vote to fire the board of directors and chief officers and replace them with people committed to offering a a satisfactory dividend or stock buyback program.
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Jan 23, 2024 18:23
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Big rear end On Fire posted:The company says "my stock is worth more than what it is trading for, currently $20. So I will buy it back at $20 per share, a bargain, and own more of myself." Also as mentioned the shareholders are the final word, so a policy of generous buybacks and price appreciation can be a strategy to keep them happy. Also chief officers have most of their compensation in stock, so it can help them too, outside of specific price incentives built into their compensation
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Jan 23, 2024 18:29
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Sure, when the stock price goes up everybody is happy. Unless you're shorting the stock but that's an entirely different discussion. Publicly traded companies have a duty to provide value to their shareholders period. If a company were to sit on profits and not grow, not provide dividends, the board would pass resolutions to change things which shareholders would vote on.
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Jan 23, 2024 18:39
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BrewingTea posted:Ok, but *why* would you buy back shares? It might make the price go up, but that doesn't make *you* money. In fact, it costs you money. Buybacks perform exactly the same economic function as dividends - return of cash to shareholders. For most of recent history, buybacks were strictly preferable for tax law reasons. This inexplicably makes a lot of people mad, so now there's a 1% tax on buybacks that may shift some companies back towards issuing dividends instead.
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Jan 23, 2024 18:39
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Also buybacks is a one time payment for the company, and then they don't have to pay dividends on those shares anymore, which is a good deal if your dividends is a large fraction of the share price
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Jan 23, 2024 18:52
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more falafel please posted:I don't know what the solution is but it certainly isn't "less baseball"
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Jan 23, 2024 19:01
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tango alpha delta posted:individual stocks are very risky unless you are given them as an employee. Even then, it all depends on the strike price when you get them. ESP and options are all tax structuring bullshit if we're talking about why an employee may want to accept them in lieu of wages. Otherwise they are companies searching for extra bag holders. In this case the bag has something in it but you're still holding it with your pants down.
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Jan 23, 2024 19:10
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zedprime posted:Individual stocks remain risky as an employee. Consider what happens if your company is caught Enroning and you are treating your ESP or options as a savings account. Oops, now you have no job and no savings. Back when I used to work for a Big Tech company, most employees had a setup where RSUs were auto-sold upon vesting. There was two reasons for it: 1) As you said: Your salary and bonus are already tied to company performance. Doubling down on exposure is unwise. 2) Shares of a company you have insider info on are not very liquid. You only have a few windows (right after earning calls, generally) where you can trade them without worries.
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Jan 23, 2024 19:21
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The stock market is bullshit but it builds on a foundation that you can see how that can work. Bitcoin fixes this by just being a scam
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Jan 23, 2024 20:19
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cruft posted:Interviewing for a job at a company whose mission was "use computers to trade stocks so fast that we can predict bumps, buy the stock, ride it up for a few seconds, and then sell it again" may have influenced my viewpoint here. I just looked these guys up. They're gone now, but they ran for 26 years and made a profit for 25.
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Jan 23, 2024 20:27
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Dividends as a counterargument to crypto is a bit of a red herring. First of all, dividends get taken out of the share price, so getting paid a dividend vs. letting that money accrue via share price is not somehow superior and usually results in higher taxes. But you do own a piece of a company when you own shares. As a thought experiment, if you own all the bitcoin, what do you have? If you own all of Amazon, what do you have? On intrinsic value: the reason why bitcoin can collapse spectacularly is that there isn't really any value there. If everyone decides it's worth a fraction of a penny each, there isn't really anything holding up the idea that it's worth more, so selling at a penny is not necessarily irrational. But if everyone decides that Amazon is worth a fraction of a penny a share? Well, they won't and they can't because there's an actual business there with many valuable assets. You can just sell one of their office desks and turn a profit on your $1 Amazon acquisition.
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Jan 23, 2024 20:41
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cruft posted:This post answered a fundamental economics question I've been trying to get people -- including professional economists -- to explain to me for over 2 decades! Thank you! Here is the other, really fundamental, point to understanding how stocks are valued: stock buybacks are, functionally, equivalent to dividends. They do the exact same thing of returning corporate profits to investors. They just do it in a tax-advantaged way compared to dividends. This is true both if a company does intermittent stock buybacks, or if the company is acquired in full. There are lots of companies that "never paid dividends" - but a fair number of them have done stock buybacks. The others are in growth mode, as people mentioned - the idea being that each dollar they reinvest will earn you more than you taking that dollar as dividends. Ultimately, stocks have a fundamental value based on the risk-weighted (the more variation, the more discount) present-valued (a dollar today is worth more than a dollar tomorrow) expected future cash flows, from dividends, buybacks, or sale of the entire company. Stocks change in value based on (a) people's changed views of how much money the company will generate in the future (being bullish or bearish on its prospects); (b) people's changed views of the risk (is the company going to generate consistent cash flow, or does it have a chance of being hugely valuable and/or go bust); and (c) how much more is a dollar worth today compared to a dollar tomorrow (as interest rates rise, a dollar today is worth more and thus future revenues become worth less). Now, people's ability to actually figure out that fundamental value is another story, as well as "does a stock's price actually track its fundamental value" and that is a complex economic/psychological argument that is made considerably worse by that both groups are not very good at math and economists have a bad habit of making assumptions based on what makes the math easier, and doing empirical studies is tough. Generally speaking crypto does not have a fundamental value. No goods or services are being created, that would generate a profit. The general argument for "value" is that they are commodities and they have value based on the value you can generate using them - for example you can generate pretty jewelry from gold, giving gold value. The problem, of course, is that crypto does not in fact generate value based on its use. So they are more akin to a speculative mania, which is a negative-sum game: no new dollars will ever be created, just reallocated among the participants minus the costs of the game based on who chose to enter and exit at various prices. However you can create crypto that is intended to mimic stock well enough that it might have a fundamental value. For example, all of the "exchange tokens" that Celsius, Voyager, FTX et al created share a lot of features with equity securities (which is why the FTX debtors are seeking to zero out FTT claims as the same as claims for stock). The issue is then you've created an unregistered security, and investing in unregistered securities is usually an exceptionally good way to get scammed.
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Jan 23, 2024 21:26
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Foxfire_ posted:[…] Bitcoin is actually worse than a worthless penny stock. Trading it actively destroys value because each transaction costs a ridiculous amount of energy to process. It’s like those Soviet companies producing things that were worth less than the raw materials going in.
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Jan 23, 2024 21:41
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Zopotantor posted:worth less than the raw materials going in. So... like a penny or a nickel?
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Jan 23, 2024 21:47
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Bitcoin is a database time share. You may not want to own database rows on a temporary basis but it doesn't make it entirely an unthing.
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Jan 23, 2024 21:50
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Zopotantor posted:Bitcoin is actually worse than a worthless penny stock. Trading it actively destroys value because each transaction costs a ridiculous amount of energy to process. It’s like those Soviet companies producing things that were worth less than the raw materials going in. Actually, the transactions are free; bitcoin wastes that energy even if no transactions were to happen.
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Jan 23, 2024 22:15
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Thanks, everyone. I think I understand. I appreciate the explanations.
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Jan 23, 2024 23:00
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cruft posted:This is how I figured all stocks worked in practice: dividends felt like a quaint throwback that nobody actually considered the point of the thing. I'm still convinced this is largely the case, but at least now I understand how people can not think this without being willfully ignorant.
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Jan 23, 2024 23:01
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Herman Merman posted:You thought that dividends didn't exist and yet it's the other people who are willfully ignorant? You got me! I don't know much about capitalism or economics or the stock market! That's why I post in General Bullshit. e: like, people have to get information in order to form their world views. Lacking information, either due to lack of time or interest or both, people tend to develop "folk models" of how things work, which is essentially formulating a model of what underlying processes create the effects they can observe. There's a great paper about folk models of computer security wherein major model families are identified, and then evaluated against what behavior results, and whether that behavior informs practices that are resilient to the actual way things work. It was based on a prior paper about how people think about thermostats. I have a folk model of investing that precludes me from trying to play the stock market myself: instead, I put money into index funds and, like, the "target retirement" thing offered by my 401(k). So far that seems to be working out for me pretty well! But it's interesting when I learn new details about what's generally held to be true. That post was me explaining an aspect of my folk model, as part of thanking the OP for explaining something I didn't know. I didn't mean "I think [this class of people] are ignorant", I meant "this helps me understand how [this class of people] are making rational decisions". cruft fucked around with this message at 01:08 on Jan 24, 2024 |
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Jan 24, 2024 00:54
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Jan 24, 2024 07:39
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Number...go up
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Jan 24, 2024 07:40
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oh gently caress yeah
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Jan 24, 2024 07:52
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https://www.youtube.com/watch?v=NuUGrtmjQfY
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Jan 24, 2024 08:07
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Jan 24, 2024 08:15
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Surely it should just be a vertical line
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Jan 24, 2024 08:49
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The master returns.
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Jan 24, 2024 10:26
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I’m convinced…lemme go find my debit card
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