US Markets Soar While Europe Depresses

[iamwhatiseem]

Dividends are making a comeback because without growth there is no other way to price stocks than dividend yield except liquidation value.

How much of a comeback? Because the trend away from dividends is one of the truly significant factors that has fucked up Wall Street.

When all the incentives and bonuses are shifted toward performance of the stock trading value we see rampant criminal enterprise focused on driving up stock values. Whereas if profitability is the main thrust we see execs trying to build successful engines of growth. Which has in the past been very good for the nation.

Damn straight.
I couldn't hit the Thanks button fast enough reading this.
This is exactly what is driving WS now...not actual physical performance, but just what the stock value can be driven to.
We have all seen it. Company stocks go through the roof because of a merger or sale of assets - while their actual production output actually REDUCED. They are selling less products, and making less money doing so - but the company nevertheless is reeping $$$ because enough spectators and anaylst drive up the stocks.
Talk about a house built on sand.

 

[uscitizen]

It is crazy.
The Dow should be around 8000 at best.
It is completely out of touch with anything other than a means for those pumping it up and down to ejaculate money for themselves.

bingo and we pay thru inflated commodity/energy prices.

 

[william the wie]

Dividends are making a comeback because without growth there is no other way to price stocks than dividend yield except liquidation value.

How much of a comeback? Because the trend away from dividends is one of the truly significant factors that has fucked up Wall Street.

When all the incentives and bonuses are shifted toward performance of the stock trading value we see rampant criminal enterprise focused on driving up stock values. Whereas if profitability is the main thrust we see execs trying to build successful engines of growth. Which has in the past been very good for the nation.

All true. What will happen is that the S&P will have to fall until index fund dividend yield is at least equal to AAA bond yield or around 343 +/- 50 by my quick and dirty estimate based on figures I recollect. Using an alternative method based on BBB bond yield I get 317 but since a bond bear can be expected and reversion to the mean usually requires a drop below the PV of yield I am expecting an inflation adjusted drop to 200-300 on the S&P or 1 oz au = DJIA as a secular bottom.

 

[loosecannon]

What will happen is that the S&P will have to fall until index fund dividend yield is at least equal to AAA bond yield or around 343 +/- 50 by my quick and dirty estimate based on figures I recollect.

That is true traditionalism speaking. I can't even wager a guess whether that cycle will repeat. On the one hand Wall Street is dead set against it, on the other hand so is virtually everything else.

We divorced "fundamentals" and I don't know if reconciliation is even possible.

 

[loosecannon]

Dividends are making a comeback because without growth there is no other way to price stocks than dividend yield except liquidation value.

How much of a comeback? Because the trend away from dividends is one of the truly significant factors that has fucked up Wall Street.

When all the incentives and bonuses are shifted toward performance of the stock trading value we see rampant criminal enterprise focused on driving up stock values. Whereas if profitability is the main thrust we see execs trying to build successful engines of growth. Which has in the past been very good for the nation.

Damn straight.
I couldn't hit the Thanks button fast enough reading this.
This is exactly what is driving WS now...not actual physical performance, but just what the stock value can be driven to.
We have all seen it. Company stocks go through the roof because of a merger or sale of assets - while their actual production output actually REDUCED. They are selling less products, and making less money doing so - but the company nevertheless is reeping $$$ because enough spectators and anaylst drive up the stocks.
Talk about a house built on sand.

Thanks.

The solution is pretty simple, mandate that stock options as a replacement for salary be illegal. Bill Gates was the prime driver of this advent but like many revolutionary ideas it worked well when it was a proprietary advantage but yielded unintended consequences when it became the norm.

Instead bonuses based in stock according to dividends would at least require firms to make a profit, tho there may again be unintended consequences.

 

[william the wie]

What will happen is that the S&P will have to fall until index fund dividend yield is at least equal to AAA bond yield or around 343 +/- 50 by my quick and dirty estimate based on figures I recollect.

That is true traditionalism speaking. I can't even wager a guess whether that cycle will repeat. On the one hand Wall Street is dead set against it, on the other hand so is virtually everything else.

We divorced "fundamentals" and I don't know if reconciliation is even possible.

In a downturn the usual pump and dump technique backfires. For example the greatest investor ever, Benjamin Graham, lost his ass 1929-33 but still his 1926-56 ROI was 4 times as great as the dividend reinvested DJIA for the same period. What happened was that he and his partner Jerry Newman specialized in stockholder revolts against companies sitting on cash not growing and not paying dividends. The boom this time was much longer and much bigger this time around but Goldman Sachs and Morgan Stanley have trading desks that will back private equity companies that will get rid of management teams that are not doing their jobs of paying out now or growing to pay out later.

The return to fundamentals is a relatively simple process of running out of bigger fools. Whether they wise up or wipe out the supply of bigger fools or even big fools shrink in a downturn and most especially a balance sheet downturn like the one we are in.