From: gts (gts@optexinc.com)
Date: Fri Sep 13 2002 - 10:31:19 MDT
Dan wrote,
> So, the reason why clarity has been so hard to come by is because
> the language in which we discuss this is very vague. In the way
> Crocker and I are speaking, saying "The value of ownership is in
> selling the stock" is a non-sequitur. If you think it makes
> sense, then you don't understand the definition we're using for
> "the value of ownership."
It's not really a non-sequitur. The problem comes from your limited
definition of "value." You limit your definition to what is known in
economics as "utility value." It is true that there is no *utility*
value in owning stock (one cannot for example drive or eat a stock
certificate) but the stock is nevertheless valuable to the owner for
investment purposes.
> If I understand correctly (I *have* learned quite a bit from this
> thread!), in fact, the value of the owning stock is in the
> *capacity* to make dividends, *even if you never actually do so*.
I would rephrase that as follows: "The value of owning the stock in the
capacity to participate in profits, though dividends and/or capital
appreciation."
There is by the way value in capital appreciation even if one choses
*not* to sell stock. One can for example place one's stock on margin,
enabling one to purchase more stock, or even to buy personal property
with actual utility value.
> The idea is that if I owned the entire stock of the company,
> I *could* take its entire future profits, as dividends, all to myself.
Yes, though you needn't take it as dividends, per se. You could name as
yourself as an employee and take the profits as income, for example.
The emphasis that you and Lee have on dividends is misplaced.
> Now, suppose my desire for collecting larger later dividends
> has fallen
> below my desire to have the cash now. Of course, I could
> then just start
> taking the profits as dividends, liquidate the company, or
> whatever. But
> I could do something else instead. I could find some guy who
> wants future
> dividends more than he wants cash today. In that case, I
> could just sell
> the stock to that guy, *without* collecting dividends or
> liquidating the
> company. I'd get my cash now, and he'd be investing in
> future dividends.
Right. Now you're getting the picture. Liquidity is the reason we have a
public stockmarket. With liquidity we can turn future earnings into
current cash flow by selling shares to the highest bidder.
-gts
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