How Bad Can Things Get

Toogood Reports ^ | June 11, 2002 | Philip Safran

[Southack]

Think smaller.

[Tauzero]

In principle I agree. The problem though, from a macro perspective, is that there are too few of those to go around.

[drlevy88]

What good is a stock anyhow? To me it doesn't seem any different than betting on football. A company may raise cash by issuing the darn things but from then on it is pure gambling. Nobody can take the stock back to the company and demand something for it.

[Texasforever]

That is a good point. There are many times when the average worker has done much better under a declining market. There are MANY non-market related factors in the economy. The major gains in the market in the last 10 years have come about because of "right-sizing". The only real control over the bottom line within a company are labor costs. However, when those cuts are so severe that a new round of hiring is required just to remain in business, the stock price may well drop but the public gains in new jobs.

[Southack]

"What good is a stock anyhow? To me it doesn't seem any different than betting on football. A company may raise cash by issuing the darn things but from then on it is pure gambling. Nobody can take the stock back to the company and demand something for it."

Heaven's no.

A stock gives you a voting right in a company's business. It gives you ownership rights and a stake in the profits, while protecting your own personal assets from the company's losses.

Many stocks pay dividends, too. CLP, a favorite Alabama REIT, pays more than 7% per year in dividends. That's much better money than you could earn in a bank CD, and CLP is backed by physical real estate and long-term tenant contracts. Banking paper AXM pays more than 13% per year in dividends. PVX is another high-payer (oil company).

But people aren't told about dividend stocks. They're told about the pump and dump "growth" stocks that pay little or no dividends (and may not even be profitable as a corporation).

Is it any wonder that those stocks without dividends are getting clobbered now that accounting scandals are being revealed?!

Is it any wonder that those of us invested in dividend stocks are seeing our economy as being rosy?! With tax deductible margin leverage, 13% dividends become more than 20% annual returns in pure cash flow, with no buying or selling "at the right time" required for such fire-and-forget income.

Let the professionals and the suckers try to guess at the right "growth" stocks, as well as the right time to buy and sell them.

The easy money isn't there. It's just not in "growth," but it is in dividends (too bad they get taxed twice).

[drlevy88]

That's nice to get dividends like that. It actually makes the stock mean something. But what is the average or median dividend? Voting rights?... color me skeptical, because the vote recommended by the officers is almost never successfully overridden by the stockholders.

[RJayneJ]

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