Yes! Money Granola Hates Me!

Oh baby! We's got a fight on our hands!

So it turns out Money Granola didn't care for my post that pretty much called him a doucher. Click back to relive the comedic gold. I personally thought the coup de grace was when I made fun of his name, in a lame hope to put him out of his misery. Maybe he'd take up blogging about apple cider or something.

But no! Money Granola struck back with this post that pretty much does exactly what I do. Which is actually pretty tits. I've said it before, I encourage people to disagree with whatever I write. I'll even give bonus points for cuss words (none for Money Granola) and Simpsons references. (score one!) It's a pretty long post, so I'm just going to cherry pick the parts that I want to respond to. I'll give Money Granola one more chance to respond, and then I'm calling truce.

The guy, I gather, fancies himself as clown the personal finance blogosphere, and he rips me as a doucher, a shithole, an idiot, fruity, and nutty. The dude even mocks my blog name. Ha! There's nothing I enjoy more than a fight, so bring it on, my fatuous friend.

Ha ha! I'm such a clown! Look at me while I make funny faces and juggle shit! Ignore the fact that I make legitimate points about shitty blog posts!

I never called Money Granola (with extra fibre!) a shithole for the record. I called him a shithead and a dipshit. Just to clear that up.

And the reason why I made fun of his blog name is pretty simple. His name is Money Granola. I would be doing the world a disservice if I didn't make fun of that. How can I take somebody seriously when their fucking name is a food metaphor? Could you come up with nothing more clever than that?

Many modern firms like Google, Microsoft and Dell, and enlightened older ones like Berkshire Hathoway don't bother paying out dividends.

Like shooting fish in a barrel...

Microsoft pays a dividend. Has since 2003.

Notice how I ignored the misspelling of Berkshire Hathaway? I'm nice like that.

Next!

The value of each share, therefore, should decline by the amount the firm paid out divided by the number of shares. Not, as Nelson naively says, by the dividend amount.

Fuck. Okay, Money Granola (with extra arrogance!) let me explain this to you one more time. I'm going to use as simple of an example I can, so your brain can comprehend.

I have a $1 stock. It pays out a 5 cent dividend. Therefore it is worth 95 cents. You still with me?

If you have a million of the $1 stock (1 million dollars market cap) and it pays out a 5 cent dividend a million times (50 thousand dollars) then you have a stock with a market cap of $950,000. Divide that by a million and you get 95 fucking cents.

You say that the value "declines by the amount the firm paid out divided by the number of shares". This is true. But if the number of shares stays the same, then we can simplify the whole exercise by just taking the monetary value of the dividend off the value of the stock.

The whole point of the exercise was, and continues to be, that the market doesn't perform the same way as it does in theory.

But the fact remains, the when stocks go x-dividend, the fundamental value of the stock decreases---because, again, the entire company value decreased by the total amount of the dividend paid out to all shareholders.

If everyone goes back to the original post, I gave him this point. He's completely right. In theory.

The fact remains that the market isn't as rational as Money Granola (extra dipshittedness!) gives it credit for. The only time the stock really adjusts for the dividend is when the dividend is pretty big or when it's a special dividend.

So how does one determine the value of a company? Is it book value? Is it market cap? Or is it the price a company could fetch if it was put up for sale?

If my Grandpa invests, don't you think his perceived value of dividends is much higher than mine?

How about if I'm investing for my illegitimate children?

The point of all this? Every investor has different motivations. This is why the market is irrational.

And in an irrational market, stocks don't always do what you'd expect them to.

III. I write, "Paying dividends to shareholders, in other words, is the functionally the exact thing as a mandatory buyback of shares." ......

My response:1) Wrong again, buddy. When all firm shareholders are forced to sell back their shares, their ownership stake in the company remains the same.

Sigh.

Once again, my Granola humping friend, "functionally" you're right. But fuck that shit. This shit doesn't happen in the real world, so why talk about it?

"Functionally" we wouldn't have fat people, (people eating food they know isn't good for them) cheating spouses, (obviously not a good idea) illegal drugs (ditto) and blogs that are named after Granola. And yet these things exist, because the real world isn't as simple as theory.

If a firm opted to purchase literally every single share, then, yes, all shares would go away. But no company could afford to do so.

So Company A pays a 3% dividend for 50 years. But instead of paying that dividend, they buy back 3% of their shares. Wouldn't all their shares go away in 33.3 years?

At the end of my post, I rhetorically ask why corporations issue them and spend so much time on them. Nelson replies: "Plain and simply because investors put a value on cash. Isn't that the whole fucking point of investing?" His truism so reductive as to be meaningless. Only a simpleton places a premium on simple cash; only a fool thinks "cash is king"

"His truism so reductive as to be meaningless" Am I the only one who hates the douchers who write like this? Big words don't automatically mean you're smart fucknut. I'm also going to ignore the boner inducing irony of a grammar error in the sentence in question.

Just about every investor puts a premium on cash. Why? Because it's versatile. I can use it to re-invest in the company that just issued me the dividend. I can redeploy it into other investments, maybe into debt or real estate. Or I can use it to buy granny porn. I can do whatever the fuck I want with it. There's its value!

Or I can do what Money Granola (with extra ass!) wants me to do with it. That is, trust managers of the companies I invest in to do the right thing with it. No thanks, I'd rather have it. So would EVERY OTHER FUCKING INVESTOR.

I'm going to stop the jokes making fun of Money Granola's name. I'm beginning to realize they stopped being funny a long time ago.

Cash loses due to inflation.

True. But it has many, many positives that outweigh that negative.

Investors value maximizing profit overall return.

That sentence doesn't even make sense. Am I allowed to make fun of that yet?

There you have it. Human straw men can exist. As Nelson demonstrates, sometimes that straw man can be rabid with a fetid mouth. Thankfully for me, he is devoid financial and investing brainpower.

I might not know what fetid means, but I do know not to make fun of somebody's financial and investing brainpower when the about you part of your blog says you're "burdened by a colossal student debt."

Come talk to me once your net worth is above zero jackass.

I will admit that I smirked when reading his post mocking Trent of The Simple Dollar for pondering the efficiency of of toilet paper squares.

That's because it's fucking hilarious! Did you read it? Oh, you did. Good.

But the deeper, more thoughtful stuff to those with the brainpower. You chump.

Hahahahahahahahahahahahahahaha!

OMG! OMG you guys!

He's making fun of my stupidity with a sentence that doesn't even make fucking sense. I don't care if I'm not allowed to make fun of grammar mistakes, I am anyway!

Okay, here's my attempt to make a little truce with my granola munching friend. I'll give him that, in theory, a lot of what he talks about is right. It's just that what he talks about will never, ever, in a billion and a half years, be reality. No company is going to not pay a dividend and instead opt for a mandatory share buyback. And if the argument is that they're exactly the same, then why not just stay with the system we have?

On the plus side, he now allows comments. So go make fun of his name. Try to use jokes that are less clever than mine though, then I'll still be the funny one. Thanks.