Ask Michael Burke Message Board

STOCKTALK

We've detected that you're using an ad content blocking browser plug-in or feature. Ads provide a critical source of revenue to the continued operation of Silicon Investor. We ask that you disable ad blocking while on Silicon Investor in the best interests of our community. If you are not using an ad blocker but are still receiving this message, make sure your browser's tracking protection is set to the 'standard' level.

Politics : Ask Michael Burke

Public Reply Prvt Reply Mark as Last Read File

Previous 10 Next 10 Previous Next

To: Peter Singleton who wrote (52430)	3/18/1999 9:30:00 AM
From: Freedom Fighter	Read Replies (2) of 132070

WSJ Article I didn't get a chance to read the WSJ article but I heard that one of the justifications for stock ownership presented was that earnings go up and bond interest stays the same. In general this whole concept is a fallacy. The vast majority of businesses do not distribute all or even most of their earnings. They grow those earnings by reinvesting a significant portion of their profit in expansion, new ventures etc... One can accomplish the same thing as a bond investor by reinvesting most of the interest. This will produce a progressively larger gross interest payment and mimic the growth in profit of the typical business. (compound interest) The determination of which route is better for the investor is dependent on the price of the stock in relation to earnings (earnings yield) vs current bond yields, the sustainable return on capital of the business vs the bond interest, how much can be reinvested in the business, and other fundamental factors of business valuation. By those standards most blue chip stocks are priced at extremely speculative levels. Wayne Crimi Value Investor Workshop members.aol.com

Report TOU Violation

Share This Post

Public Reply Prvt Reply Mark as Last Read File

Previous 10 Next 10 Previous Next