PP vs Dividend Growth Investing

Discussion of the Stock portion of the Permanent Portfolio

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Xan
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Re: PP vs Dividend Growth Investing

Post by Xan » Fri Feb 14, 2020 5:01 pm

Won't you take my Berkshire challenge? What, mathjak, is the grand total all investors have made from owning Berkshire? If it's other than zero, please explain how.
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Re: PP vs Dividend Growth Investing

Post by mathjak107 » Fri Feb 14, 2020 5:07 pm

i just told you ... if i bought berkshire day one and sold it to you at a profit , you held it a while and sold it to the next guy at a profit , he sells it at a profit to someone else and it repeats over and over .. today there may be no one who ever sold that share at a loss in theory ..... hundreds of us could have made money off that one share ..

stocks are not zero sum .
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Re: PP vs Dividend Growth Investing

Post by Xan » Fri Feb 14, 2020 5:10 pm

But every time you sell, someone else is putting in the same amount you just got out. It is zero sum.
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Re: PP vs Dividend Growth Investing

Post by mathjak107 » Fri Feb 14, 2020 5:13 pm

Xan wrote:
Fri Feb 14, 2020 5:10 pm
But every time you sell, someone else is putting in the same amount you just got out. It is zero sum.
But they are taking out more then they put in ...your are mixing up a buy price and a sell price ..

As a wholesaler in the electrical business We buy a widget , we sell a widget to a middle man for more than we paid , he sells the widget to an end user ....he paid what I sold it at to him but he sold it for more to the end user ....we both earn a living doing that.. perhaps the end user has a customer and while paid the middleman the same price the middleman paid he will earn his living selling it for more ..

It is anything but what you described
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Re: PP vs Dividend Growth Investing

Post by Xan » Fri Feb 14, 2020 5:16 pm

But every single penny that all those people earn has to come from somewhere. In this case, the buyer.

Stocks are zero sum without dividends.
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Re: PP vs Dividend Growth Investing

Post by mathjak107 » Fri Feb 14, 2020 5:17 pm

Xan wrote:
Fri Feb 14, 2020 5:16 pm
But every single penny that all those people earn has to come from somewhere. In this case, the buyer.

Stocks are zero sum without dividends.
dividends are zero sum without matching share price appreciation......and stocks are not zero sum ever based on appreciation.

In fact a stock with zero share price appreciation paying a dividend will eventually hit zero value or a penny as the share price is reduced by every dollar you get back every time ...you need the same appreciation to be anything but your own money coming back or all you did is get back the money you gave them but at zero return
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Re: PP vs Dividend Growth Investing

Post by mathjak107 » Fri Feb 14, 2020 5:23 pm

Anytime you pay a dollar and take a dollar of value off my balance that is zero sum.....that is how dividends work .....market appreciation now has to recoup that dollar in share price appreciation or I have zero return and just a piece of my own money back...

If my non div appreciates that same dollar I can draw a dollar off and have the same results as the dividend payer ..both need the same appreciation in share price or you got nothing
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Re: PP vs Dividend Growth Investing

Post by Xan » Fri Feb 14, 2020 5:27 pm

I think you're having a micro discussion while I'm having a macro discussion. Most of your points are true but not relevant.

Sure, you can make swapping stock certificates into a non-zero-sum game if you blithely ignore the other half of the equation.

Will post more later.
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Re: PP vs Dividend Growth Investing

Post by mathjak107 » Fri Feb 14, 2020 5:29 pm

Xan wrote:
Fri Feb 14, 2020 4:34 pm
Nope, selling is just passing the same thing around. The investors, as a whole, are still up exactly $0.
All I can say is I hope you don’t actually believe this ....have a good night..

You would have to believe no one ever made money in gold either since that pays no dividend and is based on the same fact someone buys at what I sell at so they make no money ......see how silly that sounds
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Re: PP vs Dividend Growth Investing

Post by dualstow » Fri Feb 14, 2020 6:18 pm

Well, this conversation has certainly taken off lately!

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Re: PP vs Dividend Growth Investing

Post by mathjak107 » Fri Feb 14, 2020 6:30 pm

dualstow wrote:
Fri Feb 14, 2020 6:18 pm
Well, this conversation has certainly taken off lately!

Vinny
The belief that somehow every stock has a matching loser is flat out wrong whether it pays a dividend out or not .....

Getting ones own money back and subtracting the payout off your balance going forward is zero sum so dividends are a zero sum game .they see return of your invested dollars from an existing value .

But stocks can pass from one investor to another endlessly with each one making a profit and selling it to the next ...stocks are based on fear ,greed and perception of future growth ...... a stock never needs to pay a dividend , it can just keep appreciating and you can take your own cash flow off that appreciation if you want ....after all don’t people get dividends and reinvest them back in to the same company ? Of course they do ......

Reinvesting only brings the value you had back to what it was before it went ex div , more shares at a lower price , same value in dollars compounding as you had ..it is just arranged differently ....in fact anyone buying that stock after it goes ex div with the same amount of money you have invested will get the same shares as you have .....
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Re: PP vs Dividend Growth Investing

Post by vnatale » Fri Feb 14, 2020 7:10 pm

Xan wrote:
Fri Feb 14, 2020 4:43 pm
You're only up because someone else is down. The investors as a whole have made zero from owning the stock.
Intuitively I think that I'm with Mathjak on this one.

Let me see if I can successfully spell it out.

There is one public company. You are its sole owner. When it was started it had $1,000 in cash, $4,000 in real estate (unimproved land) and no liabilities. You paid the net book value for the company - $5,000.

Five years later, you are still the sole owner, the company still has that $1,000 of cash and still with no liabilities, but it's developed that real estate so it is now worth $29,000. You've received no dividends along the way. You decide to sell to me who is willing to pay the current net book value for the company - now $30,000.

You now have a gain of $25,000. No dividends. All from capital appreciation. I purposely kept out any hoped for future valuations to keep it simple.

If you had received dividends of $1,000 along the way, there would have been $0 cash and then I'd have only bought it from you for $29,000. You still received the same total $30,000 minus your $5,000 basis for the same $25,000 total return.

Am I missing something?

Vinny
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