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Pastimes : Clown-Free Zone... sorry, no clowns allowed
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To: TheStockFairy who wrote (175093)6/25/2002 11:24:05 AM
From: yard_man  Read Replies (2) of 436258
 
if ur not joking -- I guess you aren't -- the major mistake is found here

>>Our model looks at how much money a stock will put in your pockets through the profits generated by the company that issued it. Then, using those returns, we put a price on a stock that is in line with the price of another asset that carries roughly the same risk.
<<

IF they don't pay a good part of that "profit" out in divvis -- it ain't real -- redeployment, as in supposed equity retirement, adds nothing to the real economic capital base -- in effect all you have is a debauchment of the dollar with respect to the stock which is nothing more than an alternative fiat currency -- subject to the same problems of confidence, inflation, etc.

Dividend yields and PEs do matter -- especially when "real profits" do sink, because it is out of these profits that each business in turns spends monies on real capital -- someone elses revenues down the line.

Bonds are a much better deal and will be for quite a while.
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