How about investing with a company that makes shovels, excavators, etc.
Like CAT?
cant go wrong with that.
“Since people are concerned that ‘X’ will not be provided, ‘X’ will naturally be provided by those who are concerned by its absence.""The sweetest of minds can harbor the harshest of men.”
http://voluntaryistreader.wordpress.org
sick! and they are only 10 oz bars. i would flip out and probably cry like a girl.
and on the other thing not saying the US are doing or think they are, but it is possible and they will do whatever is best for them. Historically i dont think they have ever done it because the dollar hasnt been under a serious threat before by a foreign currency. Also historically it has been in the best interest for the dollar for gold prices to be low, but a serious threat by the chinese can change all that.
*on a side note the history channel is coming out with a reality tv show about an entrepreneur gold miner. the show will be him and his team panning for gold in the amazon. for the entrepreneurs out there, mining the gold yourself will bring the highest returns! the show premieres Dec 9th and its called BAMAZON
About Google.
Peter Schiff spoke about Google and raised an interesting point, and I'd like ot see what the OP or others have to say about it.
Here's his argument, in my own words:
Google pays no dividends. Never has and never will. Why should they? In other words Google can invent self driving cars and Google TV and every new invention and product from now to the end of time, but you the shareholder will not make any money from that. Management will, the employees will, everyone who gets a check now from Google will get a bigger one, but the simple shareholder who gets nothing now will continue to get nothing.
"Ah," someone may reply. "But theprice of the shares will go up. All the shareholders will make big bucks, not because Goggle will give them a cut of the profits, but because since Google is so profitable, demand for shares of Google will skyrocket, driving the price of shares through the roof."
"But why will the demand for shares go up?" asks Smiling Dave. "What benefit is there in owning a share of Google in the first place? If there is no benefit from owning the share, there will be no demand for owning the share, and thus no rise in prices of the shares."
"The benefit is that price of the share will go up, Smiling Dave. You just don't get it."
"But prices go up for a reason. What reason is there for the price to go up?'
"Because Google is making so much money."
You see the flaw. Google making money does not benefit a shareholder, except in that the price of his shares go up, supposedly. So the argument is that the price of the shares will go up because they will go up.
"But Dave, that's how it has always been. People are really stupid, and they think that owning a share of Google is good, because Google makes a lot of money [even though there is nothing in it for them in reality whether Google makes or loses money]. The more money it makes, the more these stupid people want shares. That's the secret here. Buying Google shares is good [if Google makes more money] because dummies and idiots will, for totally irrational reasons, want to own shares, and will pay more for them."
"Oh, OK, I see now. You are telling me that it is a good idea to invest -what a laughable term for buying stocks for such a reason - in Google because total fools think it is a good idea, and will pay good money to be idiots. Their continued idiocy is what I am supposed to count on."
"Now you got it, Dave. Took you a while".
Really? Seriously? Shades of bitcoin.
My humble blog
It's easy to refute an argument if you first misrepresent it. William Keizer
dave - i would like to hear why he believes they NEVER will, but ya i would agree google would be a terrible buy if they never pay out dividends. I would have to read more up on it. I was under the assumption when they offered the stock that was 'x' amount of time that they didnt have to pay dividends. I think they are sitting on so much cash right now and thats why they arent paying dividends. once they enter markets that require spending they will have to pay dividends to raise the stock price. Though it would depend on the elasticity of the demand for google stock. which i believe you have proven is VERY high.
If they start paying paying a 1% dividend yield it can potentially drive the price much higher than what they are paying out in dividends. I think the problem right now is they dont care about the stock price, but once they mature they will have to.
bottom line for me to give an educated opinion: im going to have to look into the stock agreement and what is actually written. i would also like to know exactly why schiff says NEVER. because they are going to need A LOT more money based only on the fiber optic network. They are going to need money if they want plan on taking fiber optics nationally and they will need money fast to fight off competition. They wont be able to take their sweet ass time like they are doing in kansas city (which is understandable for now since they are the only ones doing it, and they are feeling the market out for demand). But i agree if it is possible for google to never be strapped for cash and thus plausible to never need money then ya i am definately wrong and google is garbage (GREAT COMPANY, but garbage stock)
you have a link to shiff's specific arguement?
I heard it on Wall Street Unspun back in the day [2004?] when Google made an IPO.
With a little digging you might be able to find it on europac.net
ughh sooo frustrating. what the hell is going on with this world? we have fiat stocks now!? is everyone going mad? history will look upon bernie madoff as the pioneer of the emerging markets! WHAT IN THE WORLD!!!!!!
screw it. I'm just going to consume as much as possible and refuse to produce ever. im applying for food stamps tomorrow.
Dave, shareholders pay themselves dividends (Google is its shareholders) when they prefer to take capital out of their business vs investing it back into it. You could start a business by investing in a single hot-dog stand then use the profits from it to buy a second one. If your personal liquidity (cash) needs are satisfied by other means (income) and if you see benefit in doing so, you could keep buying new hot-dog stands with the profits and build yourself a 3,000-stand empire after twenty years. Are you saying that this enterprise would have $0 value in the market if you tried to sell it after twenty years simply because it has never paid a dividend?
z,
Can you please walk me through how to take capital out of Google? I'll indicate what I know so far, and where the gaps are in my knowledge.
Step 1. Log into broker's website.
Step 2. Buy shares of Google.
Step 3. Smiling Dave = Google [Google is its shareholders].
Step 4. Take capital out of Google. Here's where I am stuck. Please tell me how to do this, in detail.
The reason I don't see how to do it myself, based on the hot dog stand parable, is that I call the shots with my hot dog stand. But I have no say whatsoever in Google that I know about. Management, a small group of people I will never see or talk to or influence, calls the shots. Please enlighten.
well you do have a say, one share = one vote. Stockholders vote themselves dividends. Ultimately as it stands the majority shareholders of google is google.
Grant,
I'm missing something. Please tell me in detail how I can vote myself a dividend. As with z, I'll show exactly where I'm stuck.
Step 1. Buy shares of Google.
Step 2. Wait for annual meeting.
Step 3. Please tell me what to do now. I really could use a dividend. I guess it involves voting for one, and then I will get it automatically, but I'm not sure how to get enough votes to defy the wishes of management, who own a majority of the shares and thus win every vote no matter what I do.
I await enlightenment.
Sounds like you are setting me up!!! or do you really n ot know? or are you going to say that the logic behind voting yourself dividends is highly improbable (just as your one vote for president doesnt matter either) and therefore the notion of buying a share on that idea is absurd too?
*before someone makes me look silly. the shareholders ultimately decide the board of directors and they are the ones that manage whether or not dividends are paid. It all depends on the company's appointment structure. Some have shareholders elect a nominee committee and then they vote for the board, but you are indirectly voting for people who will either try to build the company as much as possible, find a medium of growth and dividends, or pay as much dividends as possible. Or you would have a direct election of the board and can either vote in person or one has the ability to proxy there vote (release your right to vote to someone else who will vote for you)
grant,
SD is making the point that any one particular shareholder, especially one with few shares, has no way of getting any $$$ from holding stock in Google. He would need a majority (or whatever amount of votes are necessary, or the board of directors, w/e) to decide to pay dividends. So unless you plan on buying a majority share in Google, you aren't gonna get any dividends. That is what leads to SD's point about Google stock being pointless to hold on to - you aren't getting any money out of owning it.
I love Smiling Dave's posts in this thread. :)
I do a fair amount of direct business investment. When I invest in one of these businesses I am getting my money back plus some additional money at an agreed upon rate. I weigh the risk of them being unable to actually earn the money needed to pay me when deciding whether to finance the project or not. This is not unlike buying a dividend stock.
Not too many years ago there was this thing called a beanie baby. You could buy one, and you made money if you could find someone in the future who was willing to pay more than you did. Chances are this person bought it hoping they, in turn, could find someone in the future who was willing to pay more than you did. At constant levels of demand this would even appear to work, due to inflation. When people stopped giving a crap about beanie babies, however, it turned out that they were only worth their asset liquidation value (a bag of beans and some cloth). This is not unlike buying non-dividend stocks.
So there you go, dividend stocks are businesses, and non-dividend stocks are worthless bags of plastic pellets.
:)
On a more serious note, the idea behind non-dividend stocks is that the owners reinvest the earnings to fuel faster growth than they could while paying dividends. There are two possible "cash out" possibilities: They switch to dividends in the future, or they get purchased. In either case the new buyers or the new dividends are based on the current, larger company earnings and not on the smaller ones you bought the company for.
So the questions become: Will my non-dividend stock company get bought, or will they switch to dividends in the future? And am I buying near the top of their growth so I don't get much extra payout if either of these things happen?
When I look at what Google is doing I am underwhelmed. Most of their products suck and/or are poorly monetized. The company has no customer service and has been riding on their good name from an earlier era for years. That will go away eventually, and I see that starting as they more aggressively monetize their current properties. They keep having personal privacy scandals. They are (sadly) under threat from antitrust cases in the US and Europe.
I see a company with most of its growth behind it, which means most of the deferred gains are behind it as well. If you bought at the beginning of 2010 you would have made something like 2% per year for the last three years. They did just come off a huge rally, so if I'm charitable and assume you sold at the top of that you would have made 7.2% per year. 7.2% while banking on hindsight timing isn't so hot.
Would I recommend Google? No way. There's way better stuff you could do with your money.
If you purchase a stock based on dividends, you are after it's income. If you purchase a stock for it's capital gain potential, then you are speculating. Robert prechter, author of Conquer the Crash, on dividends: If no divident is ever paid, of what value is a share of stock? Do you really want to own a super-successful enterprise that handsomely pays everyone involved in it except you, an owner?
Historic dividend yield chart of the S&P 500:
Dividend yield tells you how overvalued or undervalued stocks are. Note, steep market declines occur when yield are low and buying opportunities occur when yields are high.
These charts better illustrate the inverse correlation between stock indices and dividend yields:
DIVIDEND YIELD:
S&P 500:
cporter - good post and i agree with all that you said, but 2 things. 1st - their products 'suck' and you are underwhelmed with what google is doing. We have opposite views on this nor do i think we can even debate it since its really just subjective. the 2nd thing though - 'i see that starting as they more aggressively monetize their current properties'. I'm taking to mean that you are seeing resistance in the market for google products/services. Do you have an example? are you speaking specifically on a certain aspect of the company like the monetization of advertising on google or mobile?
i wouldnt recommend google either yet. i do however think it is a very important company to watch in the near and distant future.
You say that you do direct investments and there are better places to put your money.
are you direct investments relatively small? and if so how does someone go about doing it?
and do you have recommendations on what better places to invest?
I guess things are clearer to everyone now. We all see, I hope, that the question is not what products Google has in its magic bag, or how to vote my single vote, but rather when they will they finally open their wallets and actually pay a dividend?
In their eight year existence they have not done it once, and everyone but the powerless shareholders is doing just fine. What evidence is there that they will start paying dividends next year, or in the next five or ten years, or ever?
Dave, would you sell a 10% (or any other non-majority vote) share ownership in your hot-dog stand company for $0?
Don't people make money when they sell their shares, having bought the shares at a lower price?
In case my point was not clear.
Whether, at the moment, earnings/profits are being paid out as dividends or being reinvesed into the company thus increasing its assets (value) is largely irrelevant. What matters are the company's assets and it's ability to create earning/profits with them. If these two grow, the value of the company will grow, the value of your 1% ownership will grow, and with it your ability to find willing buyers for your shares (at higher prices) going forward.
The control part is being over-rated. People invest in undertakings managed/controlled by other people all the time. You only need to ensure that your incentives are lined up with the incentives of the people in control (typically more assets and more profits). When that stops being the case, you sell, but that doesn't mean that the shares you are selling are worthless.
Finally, if the controlling owners of Google decided to buy gold with the earnings instead of paying them out as dividends to shareholders, would a 1% share ownership in Google (i.e. its assets) be worth $0?