Just a few random points today.
- I'm working on a new post shitting on probably the stupidest emergency fund I've ever heard of. Stay tuned for it. It might even blow your fucking mind!
- I know I said I was going to let the whole Money Granola thing go, but I just want to inform you guys that he's made some changes to the post mocking me, changing the mistakes I pointed out. And with that move, I win. Thanks for playing MG!
- I would sure like it if more people I mocked would respond. At least leave a fucking comment or something.
- Apparently this blog is the best source for information on the whole interweb on Amanda Lang leaving BNN. So hooray for that!
- I changed the tagline on the top of the blog. I think it's much more appropriate now.
Thursday, July 23, 2009
Tuesday, July 21, 2009
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.
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.
Saturday, July 18, 2009
Oh No!
I don't want to alarm anyone, but did you all hear the news that Amanda Lang is leaving BNN?
It's true. It was all over Squeeze Play today.
Shit.
There hasn't been a hot anchor on BNN since the days of Jeanne Yurman doing New York market updates. That's like circa 2002.
And now Amanda Lang is leaving. And the worst part is, she won't say where she's going.
Dammit.
I'm not in a good mood.
I just died a little inside.
Here's a picture from Kevin O'Leary's twitter page. Enjoy, guys.
It's true. It was all over Squeeze Play today.
Shit.
There hasn't been a hot anchor on BNN since the days of Jeanne Yurman doing New York market updates. That's like circa 2002.
And now Amanda Lang is leaving. And the worst part is, she won't say where she's going.
Dammit.
I'm not in a good mood.
I just died a little inside.
Here's a picture from Kevin O'Leary's twitter page. Enjoy, guys.
Friday, July 17, 2009
Mmmmm.... Money Granola
What exactly does money granola taste like? From the looks of the newest post from the worst named blogger ever, probably like ass.This week's crap is titled Money Granola: Dividends as a mutation: and it talks about how dividends are bad.
A couple of things before I get started. Yes, I know I've been critical of dividend growth investors in the past. And yes, it's more than a little bit hypocritical to defend them. My whole beef wasn't with dividends per se, it was more about those investors caring about nothing but dividends. I like dividends too, I just don't rub one off thinking about them.
The blog I'm going to be making fun of is called Money Granola. Money fucking Granola. Seriously. What a doucher.
Dividends, I learned, do not matter to the small time investor like me. I repeat—they don’t matter, they’re irrelevant, and should not affect your purchasing decisions.
Once you read those two sentences, you realize why I have to make fun of this dipshit. I like how he's so sure of his conclusion that he feels the need to repeat himself. He's cementing his stupidity.
Say you have 10 stocks for corporation X valued at $50 each, for a total value of $500.Consider the following thought exercises:
Thinking? I can't do that!
Are you thrilled by a stock swap? If the company declares a 2-1 swap, you have 5 stocks valued at $250 each, for a value of $500.
Thrilled is an understatement! I'm so fucking hard right now! Megan Fox, you've got competition!
There are two things wrong with that sentence:
1) That is not a stock swap. It's called either a share consolidation or a reverse split
2) That has absolutely nothing to do with dividends
Are you thrilled if a company offers you stock dividends, wherein every stockholder receives an extra, say 10% share? In this case, you’d have 11 stocks—but because the your overall company ownership percentage remains the same, as both the denominator and numerator become larger.
Maybe thrilled isn't the best choice of a word here, no? I mean I'm pretty fucking excited, but I don't think everyone else is sharing your enthusiasm. This does give me a good excuse to link to a picture of Jessica Alba, so I'll take advantage of that.
If Money Granola (with raisins!) had bothered to research the topic, he'd find that almost no companies do this, pretty much for the reason he explained. It's kind of a pointless exercise, which is why nobody does it in the fucking real world.
Are you thrilled if the company offers a mandatory buyback 10% of your shares?
Seriously. I'm not fucking thrilled. Neither is anyone else. Fuck off with that word.
Also, generally investors aren't going to the "thrilled" with that. Mandatory share buybacks are stupid, which, again, is why nobody does it in the real world.
This whole argument is just so fucking stupid. It's like, say, arguing about why we put fluoride in our drinking water, which is literally the first thing that popped into my head. So instead of listing real reasons for your argument, you base your whole defense on the fact that fluoride kills boogymen and strengthens unicorns at the SAME TIME.
When a corporation issues a dividend, the value of the corporation’s total assets decreases. (Incidentally, the day that a company declares a dividend, it’s said be going x-dividend. On the day the stock goes x-dividend, there’s an “x” by its price on the NYSE to indicate to investors why the price decreased.)
On the one hand, he's kinda right. Yes, if a company pays out $100 in dividends, then the value of the assets of that company does go down by $100. That money is gone. But the market isn't that simple. A stock doesn't just go down because they've paid a dividend. The way the market performs that day has more of an impact than the dividend going x-dividend. The market realizes that a company pays dividends and prices it accordingly.
What does that giant paragraph mean? It means that if we look at 5 companies at random, on the day they went x-dividend, their share price should have decreased by at least the value of their quarterly dividend. (perhaps more if the market was down that day) Do they? Let's check.
1. AT&T- Most recent x-dividend: July 8th
Down 79 cents (3%)
Market (S&P 500) down marginally
*AT&T pays a 41 cent quarterly dividend
2. Coke- Most recent x-dividend: June 11th
Up 17 cents (0.33%)
Market (S&P 500) up about 0.5%
*Coke pays a 41 cent quarterly dividend
3. Hewlett Packard- Most recent x-dividend: June 8th
Down 57 cents (almost 2 percent)
Market (S&P 500) down marginally
*HPQ pays an 8 cent quarterly dividend
4. McDonalds- Most recent x-dividend: June 4th
Down 75 cents (about 1.5%)
Market: Up over 1%
*McDonalds pays a 50 cent quarterly dividend
5. Walmart- Most recent x-dividend: May 13th
Down 87 cents (about 1.5%)
Market: Down almost 3%
*Walmart's quarterly dividend is 27.3 cents
Let's look at our findings, shall we:
1) AT&T- Went down by almost double what the dividend was on a pretty flat day. So that one is plausible
2) Coke- Performed slightly under the market, up a third of a percent while the market was closer to half a percent. Doesn't take into affect the almost 1% of share price dividend at all. Fail.
3. HP- Went down way more than the dividend on a flat day. Obviously more here than the dividend Fail.
4. McDonalds- Went down on a generally up day, and the percentages look pretty close. I'll give you that one.
5. Walmart- Outperformed the market and went x-dividend on the same day? Pretty epic fail.
So out of 5 stocks, you get one yes and one maybe.
Paying dividends to shareholders, in other words, is the functionally the exact thing as a mandatory buyback of shares.
No it isn't. For several reasons:
1) Shares don't always go up. A mandatory share buyback could mean being forced to sell at a loss.
2) It's MUCH more simple to pay out dividends as it is to do a mandatory share buyback.
3) Wouldn't a mandatory share buyback eventually make all of someone's shares go away?
4) You're named after granola. Nice call on that one. We've all had some shitty calls in our day, but that one takes the cake.
With the dividend reinvestment, I lose no value in my investment, nor do I lose value.
Actually, if all things stay the same (which over time, it will) then you stand to make money from dividends. Because the market puts a value on dividends that it wouldn't on stupid shit like mandatory share buybacks.
Ever heard the expression "cash is king?"
With my $25 in capital gains, I will be taxed at 15%--in addition to the normal tax I will be charged when I sell my “free” stocks at a future date.
I'm actually legitimately confused with this statement. So when he has capital gains now he has to pay 15%, but later in the future when he has capital gains he'll have to pay more?
Money Granola (extra fruity!) is either crazy or crazy like a fox. I'm guessing he's the first.
If a company reinvested its earnings, like Warren Buffett’s Berkshire Hathaway does, I would not have to pay those taxes.
Oh Money Granola... (without nuts!) Thank you so much for being so stupid. Really, I owe you one.
Okay, if you hold an investment for a long period of time, you don't NOT pay taxes. You just defer them for a long period. Granted, there is value in this, but it's hardly the same as not having to pay taxes.
Another thing. For every Berkshire Hathaway success stories, there are thousands of companies that failed more miserably than that time I tried to hit on the big titted waitress at my favorite restaurant. And I fail pretty bad, mostly cause I still live in my mom's basement.
Is titted a word? Comments people!
If dividends are such a tax nuisance, why do corporations issue them and spend so much time on them?
Plain and simply because investors put a value on cash. Isn't that the whole fucking point of investing?
Bottom line: I'm not going all dividend growth investor on everyone. Dividends aren't everything when it comes to investing. But saying they're pretty worthless is pretty fucking stupid.
The worst part is that he doesn't allow comments. Maybe he saw me coming.
A couple of things before I get started. Yes, I know I've been critical of dividend growth investors in the past. And yes, it's more than a little bit hypocritical to defend them. My whole beef wasn't with dividends per se, it was more about those investors caring about nothing but dividends. I like dividends too, I just don't rub one off thinking about them.
The blog I'm going to be making fun of is called Money Granola. Money fucking Granola. Seriously. What a doucher.
Dividends, I learned, do not matter to the small time investor like me. I repeat—they don’t matter, they’re irrelevant, and should not affect your purchasing decisions.
Once you read those two sentences, you realize why I have to make fun of this dipshit. I like how he's so sure of his conclusion that he feels the need to repeat himself. He's cementing his stupidity.
Say you have 10 stocks for corporation X valued at $50 each, for a total value of $500.Consider the following thought exercises:
Thinking? I can't do that!
Are you thrilled by a stock swap? If the company declares a 2-1 swap, you have 5 stocks valued at $250 each, for a value of $500.
Thrilled is an understatement! I'm so fucking hard right now! Megan Fox, you've got competition!
There are two things wrong with that sentence:
1) That is not a stock swap. It's called either a share consolidation or a reverse split
2) That has absolutely nothing to do with dividends
Are you thrilled if a company offers you stock dividends, wherein every stockholder receives an extra, say 10% share? In this case, you’d have 11 stocks—but because the your overall company ownership percentage remains the same, as both the denominator and numerator become larger.
Maybe thrilled isn't the best choice of a word here, no? I mean I'm pretty fucking excited, but I don't think everyone else is sharing your enthusiasm. This does give me a good excuse to link to a picture of Jessica Alba, so I'll take advantage of that.
If Money Granola (with raisins!) had bothered to research the topic, he'd find that almost no companies do this, pretty much for the reason he explained. It's kind of a pointless exercise, which is why nobody does it in the fucking real world.
Are you thrilled if the company offers a mandatory buyback 10% of your shares?
Seriously. I'm not fucking thrilled. Neither is anyone else. Fuck off with that word.
Also, generally investors aren't going to the "thrilled" with that. Mandatory share buybacks are stupid, which, again, is why nobody does it in the real world.
This whole argument is just so fucking stupid. It's like, say, arguing about why we put fluoride in our drinking water, which is literally the first thing that popped into my head. So instead of listing real reasons for your argument, you base your whole defense on the fact that fluoride kills boogymen and strengthens unicorns at the SAME TIME.
When a corporation issues a dividend, the value of the corporation’s total assets decreases. (Incidentally, the day that a company declares a dividend, it’s said be going x-dividend. On the day the stock goes x-dividend, there’s an “x” by its price on the NYSE to indicate to investors why the price decreased.)
On the one hand, he's kinda right. Yes, if a company pays out $100 in dividends, then the value of the assets of that company does go down by $100. That money is gone. But the market isn't that simple. A stock doesn't just go down because they've paid a dividend. The way the market performs that day has more of an impact than the dividend going x-dividend. The market realizes that a company pays dividends and prices it accordingly.
What does that giant paragraph mean? It means that if we look at 5 companies at random, on the day they went x-dividend, their share price should have decreased by at least the value of their quarterly dividend. (perhaps more if the market was down that day) Do they? Let's check.
1. AT&T- Most recent x-dividend: July 8th
Down 79 cents (3%)
Market (S&P 500) down marginally
*AT&T pays a 41 cent quarterly dividend
2. Coke- Most recent x-dividend: June 11th
Up 17 cents (0.33%)
Market (S&P 500) up about 0.5%
*Coke pays a 41 cent quarterly dividend
3. Hewlett Packard- Most recent x-dividend: June 8th
Down 57 cents (almost 2 percent)
Market (S&P 500) down marginally
*HPQ pays an 8 cent quarterly dividend
4. McDonalds- Most recent x-dividend: June 4th
Down 75 cents (about 1.5%)
Market: Up over 1%
*McDonalds pays a 50 cent quarterly dividend
5. Walmart- Most recent x-dividend: May 13th
Down 87 cents (about 1.5%)
Market: Down almost 3%
*Walmart's quarterly dividend is 27.3 cents
Let's look at our findings, shall we:
1) AT&T- Went down by almost double what the dividend was on a pretty flat day. So that one is plausible
2) Coke- Performed slightly under the market, up a third of a percent while the market was closer to half a percent. Doesn't take into affect the almost 1% of share price dividend at all. Fail.
3. HP- Went down way more than the dividend on a flat day. Obviously more here than the dividend Fail.
4. McDonalds- Went down on a generally up day, and the percentages look pretty close. I'll give you that one.
5. Walmart- Outperformed the market and went x-dividend on the same day? Pretty epic fail.
So out of 5 stocks, you get one yes and one maybe.
Paying dividends to shareholders, in other words, is the functionally the exact thing as a mandatory buyback of shares.
No it isn't. For several reasons:
1) Shares don't always go up. A mandatory share buyback could mean being forced to sell at a loss.
2) It's MUCH more simple to pay out dividends as it is to do a mandatory share buyback.
3) Wouldn't a mandatory share buyback eventually make all of someone's shares go away?
4) You're named after granola. Nice call on that one. We've all had some shitty calls in our day, but that one takes the cake.
With the dividend reinvestment, I lose no value in my investment, nor do I lose value.
Actually, if all things stay the same (which over time, it will) then you stand to make money from dividends. Because the market puts a value on dividends that it wouldn't on stupid shit like mandatory share buybacks.
Ever heard the expression "cash is king?"
With my $25 in capital gains, I will be taxed at 15%--in addition to the normal tax I will be charged when I sell my “free” stocks at a future date.
I'm actually legitimately confused with this statement. So when he has capital gains now he has to pay 15%, but later in the future when he has capital gains he'll have to pay more?
Money Granola (extra fruity!) is either crazy or crazy like a fox. I'm guessing he's the first.
If a company reinvested its earnings, like Warren Buffett’s Berkshire Hathaway does, I would not have to pay those taxes.
Oh Money Granola... (without nuts!) Thank you so much for being so stupid. Really, I owe you one.
Okay, if you hold an investment for a long period of time, you don't NOT pay taxes. You just defer them for a long period. Granted, there is value in this, but it's hardly the same as not having to pay taxes.
Another thing. For every Berkshire Hathaway success stories, there are thousands of companies that failed more miserably than that time I tried to hit on the big titted waitress at my favorite restaurant. And I fail pretty bad, mostly cause I still live in my mom's basement.
Is titted a word? Comments people!
If dividends are such a tax nuisance, why do corporations issue them and spend so much time on them?
Plain and simply because investors put a value on cash. Isn't that the whole fucking point of investing?
Bottom line: I'm not going all dividend growth investor on everyone. Dividends aren't everything when it comes to investing. But saying they're pretty worthless is pretty fucking stupid.
The worst part is that he doesn't allow comments. Maybe he saw me coming.
Monday, July 13, 2009
The Best Friend Ever
Great news everyone!
No, I'm not stopping blogging forever. It just seems like it after approximately 342 weeks of not posting. Sorry about your luck on this one.
Nope, this is even better. Set your faces to stun.
You can become a "friend" of the Simple Dollar!
Holy shit.
Holy shit you guys.
Can you believe the opportunity I have?!?!?!?!?!?
Basically, someone signs up to get a monthly(ish) email asking them to fill out a survey, or voting on a book cover design, or something like that. Trent is basically doing market research on his readers. Smart idea, really.
He also says: "On occasion, I might send out something special to the list to show my appreciation for your help, too."
Hopefully it's more info on making your own laundry detergent.
Yes people, I'll be back with more real content soon. Some of it will blow your fucking minds.
And since you've been so patient, here's a scantily clad picture of Ivanka Trump for your enjoyment. Boners up fellas!
No, I'm not stopping blogging forever. It just seems like it after approximately 342 weeks of not posting. Sorry about your luck on this one.
Nope, this is even better. Set your faces to stun.
You can become a "friend" of the Simple Dollar!
Holy shit.
Holy shit you guys.
Can you believe the opportunity I have?!?!?!?!?!?
Basically, someone signs up to get a monthly(ish) email asking them to fill out a survey, or voting on a book cover design, or something like that. Trent is basically doing market research on his readers. Smart idea, really.
He also says: "On occasion, I might send out something special to the list to show my appreciation for your help, too."
Hopefully it's more info on making your own laundry detergent.
Yes people, I'll be back with more real content soon. Some of it will blow your fucking minds.
And since you've been so patient, here's a scantily clad picture of Ivanka Trump for your enjoyment. Boners up fellas!
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