Author Topic: Question for the Future  (Read 9743 times)

Pooperman

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Question for the Future
« on: October 28, 2015, 11:30:36 AM »
Given projected demographic shifts in developed (and many developing) nations, how will the stock markets respond? My feeling is that the overall, the market will grow (after inflation) roughly in proportion with the growth of the working-age population. This is not good for many foreign markets (US will be ok at about 2%). I don't think that equities have a bright future over much of my lifetime.

What alternatives are there to help meet the 4% rule if the future returns from the markets will be ~2% post inflation?

Interest Compound

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Re: Question for the Future
« Reply #1 on: October 28, 2015, 11:35:46 AM »
You can use a Variable Percentage Withdrawal (VPW) and/or an SPIA if it makes sense for your age. You'll end up taking out more than 4% overall, and there's no risk of depleting the portfolio early.

nereo

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Re: Question for the Future
« Reply #2 on: October 28, 2015, 09:04:45 PM »
Pooperman, this is probably the macroeconomics question that I spend the most time thinking about.  I don't have any concrete answers for you, but here are some late-night musings...

EVery single one of the 10 largest economies today is predicted to have a much older population in 35 years.  Some, like China and India, will triple the number of 'retirement age' people.  Japan is predicted to have 40% of it's population over age 65.  Yikes.  The US will be getting older, but seems like it will have less of a problem than many other developed nations in this regard.  Of course, these are all predictions and it's just a 'best guess' what immigration will look like.

So - from this data here are a few of my predictions
1) we'll see the nature of 'work' change and see a lot more people in their 60s, 70s and even 80s hold down some form of employment.  I doubt they will 'work' like we do now - no 9:5 jobs, but we're going to have a lot of people who need to work and not enough young people to do all the work that is needed.  Smart employers may anticipate this and create jobs specifically designed for the older citizens.  Maybe that means we develop a 'retirement shift' staffed largely by elders that work just on Saturdays and Sundays (allowing those raising families to work the typical M-F while keeping the businesses open during the weekends).  I dunno - but I do think whichever companies can tap into this enormous workforce of individuals who both want to work and need to work (because of debt/poor life decisions) will make crush their competitors.

2) Devices for "assisted living" will be incredibly important.  In 2050 the elderly will be the Gen Xers - they've grown up with technology and won't be as unfamiliar with it as today's octigenarians are.  THey're going to want to continue to be independent even when their bodies start to break down.

3) health care and retirement plans are going to take a massive beating.  Health care has always been massively more expensive for the elderly - how will we cope when 25-30% of our population is above age 65?  It's easy to imagine scenarios where health care and social security/old age security make up almost an entire country's budget.  Will we place more 'caps' on how much health care or SS a person gets if they live too long or get too sick? Ironically, the US is projected to have less problems in this area than others because i's still predicted to have a very large working population. 

4) immigration.  Here's where I think forecasting models might be way off.  When there's a vacuum resources flow to fill it.  In this case, certain countries might throw open their borders to young healthy workers.  Historically this has happened before, fundamentally changing the ethnicity, even the religion of those countries.  It will be interesting to see what happens if millions of people from Africa (for example) flood into China or Japan.

5) we've been really bad at predicting population changes decades into the future.  Another world war, a global pandemic like the 1918/1919 inflenza outbreak or the utter collapse (and subsequent exodus) of a very large economy could screw up all of these estimates.

other fun predictions by 2050:  India is predicted to have the worlds largest population (1,600MM), surpassing China (#2 with 1,366MM).  The US will continue to grow to remain the 3rd most populous nation (398MM), but Nigeria's population could more than double (397MM) leapfroging Indonesia (366MM) to become the 4th most populous nation.   Pakistan (344MM) may surpass Brazil to become #5. 

Currently there are about 900MM people over age 65.  By 2050 there could be over 2B.  That's a 130% increase in the number of elderly while our global population only increases about 35%.

A few fun graphs to ponder:


forestj

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Re: Question for the Future
« Reply #3 on: October 28, 2015, 09:52:45 PM »
Think about how much in our economy has changed since 1965. You may even notice that the pace of change has been increasing ever since then, especially with the adoption of the internet. In my opinion, it is ridiculous to try to frame a view of the future in terms of our economy today. A lot can change between now and then, both in terms of technology, and in terms of the structure of society.

I can imagine a world in which the idea of "earning a living" is ludicrous and antiquated because there is nothing left that humans can do more efficiently than machines. Therefore, it won't matter how many "Retirement-age people" there are, since the retirement age has dropped to 0. It might seem far-fetched now, but a Silicon Valley and our digital "new economy" probably would've also seemed equally impossible to most people in 1965.

It's also possible that there's a nuclear war or other catastrophe that eliminates 95% of the population.

In short, I don't think it makes sense to try to plan 40 years in advance. If I was actively investing for the future, I think I would try to take it 5 or 10 years at a time.

Right now I have some loose change put into bitcoin because I think it could be a big deal within 5 years. I also have a diverse basket of stock funds because I think that they will probably be either ok or great over the next 10 years.
« Last Edit: October 28, 2015, 09:56:43 PM by forestj »

Pooperman

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Re: Question for the Future
« Reply #4 on: October 29, 2015, 06:38:58 AM »
Quite appropriate for this discussion!

nereo

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Re: Question for the Future
« Reply #5 on: October 29, 2015, 07:39:54 AM »
Think about how much in our economy has changed since 1965. You may even notice that the pace of change has been increasing ever since then, especially with the adoption of the internet. In my opinion, it is ridiculous to try to frame a view of the future in terms of our economy today. A lot can change between now and then, both in terms of technology, and in terms of the structure of society.

I can imagine a world in which the idea of "earning a living" is ludicrous and antiquated because there is nothing left that humans can do more efficiently than machines. Therefore, it won't matter how many "Retirement-age people" there are, since the retirement age has dropped to 0. It might seem far-fetched now, but a Silicon Valley and our digital "new economy" probably would've also seemed equally impossible to most people in 1965.

It's also possible that there's a nuclear war or other catastrophe that eliminates 95% of the population.

In short, I don't think it makes sense to try to plan 40 years in advance. If I was actively investing for the future, I think I would try to take it 5 or 10 years at a time.

Right now I have some loose change put into bitcoin because I think it could be a big deal within 5 years. I also have a diverse basket of stock funds because I think that they will probably be either ok or great over the next 10 years.

I agree with you that long term predictions are subject to some very large errors, and should be taken with a grain (or two) of salt.  However, I can't agree that we shouldn't at least consider what the world might look like in 35 years.  Demographics are one area that is fairly predictable, since we can make decent estimates of older populations based on the people alive today (i.e. 30 & 40 somethings today will be the elderly in 35 years) and the number of people who will be in the workforce is largely the number of children we have today plus an estimate of those that will be born in the next ~10 years (which we base on fertility rates).   We have to look further down the field than just 5-10 years, even if our estimates are off.  Major infrastructure projects do this all the time - large bridges, school networks, etc are designed not with the current population in mind, but with what we hope and expect the future population will be.  Sometimes we are wrong and the results are very bad.  But it would be far worse if we never even tried to consider 3-5 decades into the future. =

Also, your prediction that advances in technology may fantastically reduce or entirely eliminate the need to work was proposed about 100 years ago (can't find the source right now - if someone can link it I'd appriciate it). The argument was similar; increased efficencies provided by machines would eliminate the need for men to work and humanity could all enjoy a 10 hour work week.  The advances in efficiency indeed happened, but something else changed too - our desires for more 'advanced' living kept up or leapfrogged these advances in efficiency.  We wanted a car and a home with our own bathroom, and then two cars and three bathrooms and then vacations to locations our great-grandparents never would have dreams of seeing.  It's called the Hedonic Treadmill.  As other writers have pointed out, a "poor" person in today's America probably has a flush toilet, a cell phone, a personal car, a television and air conditioning.  These were all luxuries that only the rich could afford 75 years ago.

I would love to see a world where people only had to work for a few days a week for a couple of decades and then could pursue other interests.  But as a species we've never been very good at curbing our desires.  Look at the median, real-adjusted salaries earned today and compare them with what "the Greatest Generation" earned: we've gone from $23k to $52k (2015 dollars).  Yet most families are still in debt, still can't retire and still chase newer, fancier trinkets.  It seems it has been this way since before the first industrial revolution, and may always stay that way. 

As I said, it's all just a thought exercise and I appreciate your input.  I hope you are right and we see a burst of machines that allow us to break from this cycle of 'required work' and instead spend our times doing what we really want.   I just find it incredibly unlikely based on history.

forestj

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Re: Question for the Future
« Reply #6 on: October 29, 2015, 10:31:26 PM »
I guess I think that mustachianism is the rejection of the hedonic treadmill. It has never really been popular, and I'm not sure if it ever will be. But when you step off, you can, to some extent, do whatever the hell you want.

You are probably right that we (generally speaking, lets say, 80% of people) will never reach utopia but what I meant is, that with a bit of luck, hard work, and mental fortitude, you can make your own utopia for yourself, and it might get easier and safer to do so in the future. Not everyone has to do it for it to be possible, or, to be a thing.

Maybe we get socialist candidates in, we get a universal basic income, and the economy takes off at the same time due to technological advances. Maybe only 10% of people can afford the new space yachts that are all the rage, but the basic income is enough to get by in the poorer areas and you don't have to work. Sure, tons of people are going to work anyway so they can get the new iPhone 79 S. But some people might choose not to, and find a lot of value in it.

I guess I was just saying that I could imagine wild swings in either direction. I have a bad habbit of sounding sure of myself when I am making up hypothetical situations..
« Last Edit: October 29, 2015, 10:54:50 PM by forestj »

Grog

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Re: Question for the Future
« Reply #7 on: October 30, 2015, 12:26:28 AM »
I wouldn't be too worried because you forgot another important emigraion flow: the one from retired people of rich countries to cheaper, sunny countries. Is already happening here in europe: a lot of people from UK/Germany/Switzerland/scandinavian countries is retiring in the South/mediterranean region (Italy, Greece, Spain, Portugal) http://www.vaprealestate.com/buy/non-habitual-resident-benefits-permit-retirees-portugal_44]Portugal has even proposed fiscal benefit ( [url]http://www.vaprealestate.com/buy/non-habitual-resident-benefits-permit-retirees-portugal_44 ) for expat retired people in order to be more attractive.
And in the meantime, I've seen and talked with retiree from spain and greece living in Morocco, living even more cheaply (locally grown strawberries in Februar for less half a dollar per kg? sign me up!).
With advance in telecommunication remaining in contact with relatives, grand children and friends will not be a problem anymore (Skype 3d in 2050 anyone?).

So older people will be bringing back money to "third-world"countries and compensate for the younger leaving to work in richer countries. In the meantime, the needs for the elderly (private clinic, helping aids) will create jobs in the cheaper countries. The age pyramid will be levelling and compensate each other between countries. The fact that state pension will be maybe too low will even force older people to move away, who knows.

Sometimes far away in the future the cost of living I'll imagine will starting be the same in all countries and then people will starting choosing retirement exclusively for quality of life/weather desired. But we are not there.

Pooperman

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Re: Question for the Future
« Reply #8 on: October 30, 2015, 03:50:08 AM »
Population leveling means no working age demographic shifts. That leads to no growth via population (because population grown is the biggest driver of economic activity).

nereo

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Re: Question for the Future
« Reply #9 on: October 30, 2015, 05:52:47 AM »
I guess I think that mustachianism is the rejection of the hedonic treadmill. It has never really been popular, and I'm not sure if it ever will be. But when you step off, you can, to some extent, do whatever the hell you want.

You are probably right that we (generally speaking, lets say, 80% of people) will never reach utopia but what I meant is, that with a bit of luck, hard work, and mental fortitude, you can make your own utopia for yourself, and it might get easier and safer to do so in the future. Not everyone has to do it for it to be possible, or, to be a thing.

I agree with you - i just think it's out of the scope of this thought exercise.  Of course you or I could reject the hedonic treadmill, save money from our exploding volcano of cash and wind up happy and permanently FI midway through our long lives.  But I was talking about the headwinds that nations face - and even if 10% of the populaiton gives up the chase for space-yahcts we still face the same challenges - more older people and fewer working ones. 
It's not all bad - I'm an optimist by nature.  But it's a reality I think we need to prepare for. 

nereo

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Re: Question for the Future
« Reply #10 on: October 30, 2015, 05:59:19 AM »
I wouldn't be too worried because you forgot another important emigraion flow: the one from retired people of rich countries to cheaper, sunny countries. Is already happening here in europe: a lot of people from UK/Germany/Switzerland/scandinavian countries is retiring in the South/mediterranean region (Italy, Greece, Spain, Portugal) Portugal has even proposed fiscal benefit ( [url]http://www.vaprealestate.com/buy/non-habitual-resident-benefits-permit-retirees-portugal_44]http://www.vaprealestate.com/buy/non-habitual-resident-benefits-permit-retirees-portugal_44]Portugal has even proposed fiscal benefit ( [url]http://www.vaprealestate.com/buy/non-habitual-resident-benefits-permit-retirees-portugal_44 ) for expat retired people in order to be more attractive.

My only argument against such logic is that almost every major country has aging population.  Globally, it's estimated the number of people over 65 will grow from about 900MM now to 2B in 35 years.  Regardless of how it plays out, there's going to be a lot of countries with a lot more older people.  Simply put; many countries are going to wind up with lots more older people, regardless of how many shift about.

I agree with you that I think immigration is hte big wild-card here.  There will be a net flow of worker between countries, and a net flow of older people.  HOw countries deal with that any prevent/encourage that is going to be really, really interesting.

Grog

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Re: Question for the Future
« Reply #11 on: October 30, 2015, 09:56:29 AM »
I think most of the developed country have an aging population because those really old retiree (between 80 and 100 years old) retired in the '80s/'90s were low cost air ticket or internet communication was not only not existent, but probably wasn't even imagined. They were less healthy too (more smoking/alcohol). And the cold war was still going on.....people planned and built a life in the safety of their developed countries, near children and nephew that weren't supposed to hop around the planet working one year in europe two in asia and three who knows where.
People that are 60 right now look like 50 and have no problem with iphone/skype/airtravel. Their children and nephew are all over the world, working in different countries. There is really no point in staying "home". So I think the demographics right now are skewed because of this older generation, the cold war one, and things will be changing slowly with more "retiree expat". If cost of life increase too much for pension they will be forced towards cheaper countries anyway.

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nereo

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Re: Question for the Future
« Reply #12 on: October 30, 2015, 10:08:57 AM »
I think most of the developed country have an aging population because those really old retiree (between 80 and 100 years old) retired in the '80s/'90s were low cost air ticket or internet communication was not only not existent, but probably wasn't even imagined. They were less healthy too (more smoking/alcohol). And the cold war was still going on.....people planned and built a life in the safety of their developed countries, near children and nephew that weren't supposed to hop around the planet working one year in europe two in asia and three who knows where.
People that are 60 right now look like 50 and have no problem with iphone/skype/airtravel. Their children and nephew are all over the world, working in different countries. There is really no point in staying "home". So I think the demographics right now are skewed because of this older generation, the cold war one, and things will be changing slowly with more "retiree expat". If cost of life increase too much for pension they will be forced towards cheaper countries anyway.


I don't understand how global travel matters in a world that will see a two-fold+ increase in elderly in the next 35 years.  Maybe most of the old people in the US move to mexico... now Mexico has lots of old people. 

So - let me ask you this - if you think lots of retirees are going to move to new countries, which ones will recieve a surge in the elderly population and what will the ramifications of that shift be?

hodedofome

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Re: Question for the Future
« Reply #13 on: October 31, 2015, 07:02:07 AM »
We keep saying we're gonna run out of oil at a certain date, but then we keep discovering new oil that makes the previous predictions look silly.

We have no idea how much immigration could play a part in population numbers in the US. Heck, the EU may find it's population problems fixed with a few more wars in the Middle East.

China just changed the course of their future in one day by easing the one child policy. Talk about a black swan.

nereo

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Re: Question for the Future
« Reply #14 on: October 31, 2015, 08:36:14 AM »
We keep saying we're gonna run out of oil at a certain date, but then we keep discovering new oil that makes the previous predictions look silly.
How does discussions on peak oil relate to population demographics?  Its far easier to understand populations than it is to compute how much oil is or is not available. 

Quote
We have no idea how much immigration could play a part in population numbers in the US. Heck, the EU may find it's population problems fixed with a few more wars in the Middle East.
Morbid, really morbid.  It's possible wars could change the demographics, but it would have to be a war (or wars) beyond the scope of what we've seen before.  Even WWII, with 60MM killed was only a minor demographic blip - about 2% of the global population.  Wars tend to disproportionately kill off those in their teens-to-30s - take a look at what happened to Russia during WWII when over 60% of their young men were killed.

Quote
China just changed the course of their future in one day by easing the one child policy.
No, they did not.  The slight change in China's One Child policy isn't going to change the fact that their over 65 population will triple in the next three decades.  Given that the maximum number of babies a couple can have has gone from 1 to 2 it won't be a huge baby boom either, even if every couple decides to have that second child (which it seems most won't)
https://www.washingtonpost.com/world/asia_pacific/horrors-of-one-child-policy-leave-deep-scars-in-chinese-society/2015/10/30/6bd28e0c-7e7b-11e5-bfb6-65300a5ff562_story.html
https://www.washingtonpost.com/world/asia_pacific/china-lifts-one-child-policy-amid-worries-of-graying-population/2015/10/29/207fc0e6-7e2b-11e5-beba-927fd8634498_story.html

Quote
Talk about a black swan.
A black swan, by definition, is something you can't plan for or predict.  We can predict this - even if our estimates might be a bit off, just as we've known about the 'baby-boomers' swelling our employment ranks for decades, and now swelling the number of retirees we have in this country.  It's the exact opposite of a black swan.

innerscorecard

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Re: Question for the Future
« Reply #15 on: November 01, 2015, 03:21:04 PM »
The market does not have to provide the expected returns people want. Actually, I think it almost has to not do so, in the aggregate.

nereo

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Re: Question for the Future
« Reply #16 on: November 02, 2015, 05:20:48 AM »
The market does not have to provide the expected returns people want. Actually, I think it almost has to not do so, in the aggregate.
why do you think this?  Specifically, why do you think the market has to NOT deliver the returns people expect?

beltim

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Re: Question for the Future
« Reply #17 on: November 02, 2015, 11:00:14 AM »
Given projected demographic shifts in developed (and many developing) nations, how will the stock markets respond? My feeling is that the overall, the market will grow (after inflation) roughly in proportion with the growth of the working-age population.

Do you have any data that supports this feeling?

It seems like a subset of the "stock market returns are a function of the growth in GDP" argument that makes no sense and has been demonstrated to not be true.

Pooperman

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Re: Question for the Future
« Reply #18 on: November 02, 2015, 01:51:27 PM »
Given projected demographic shifts in developed (and many developing) nations, how will the stock markets respond? My feeling is that the overall, the market will grow (after inflation) roughly in proportion with the growth of the working-age population.

Do you have any data that supports this feeling?

It seems like a subset of the "stock market returns are a function of the growth in GDP" argument that makes no sense and has been demonstrated to not be true.

If demographics change where people in retirement age grows considerably, there's down-pressure on the markets from more sellers compared to buyers. The inverted population demographics in many countries will cause poor returns in those markets until normalcy returns.

beltim

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Re: Question for the Future
« Reply #19 on: November 02, 2015, 02:02:13 PM »
Given projected demographic shifts in developed (and many developing) nations, how will the stock markets respond? My feeling is that the overall, the market will grow (after inflation) roughly in proportion with the growth of the working-age population.

Do you have any data that supports this feeling?

It seems like a subset of the "stock market returns are a function of the growth in GDP" argument that makes no sense and has been demonstrated to not be true.

If demographics change where people in retirement age grows considerably, there's down-pressure on the markets from more sellers compared to buyers. The inverted population demographics in many countries will cause poor returns in those markets until normalcy returns.

Again, do you have any data for this?

The converse to your argument is that population booms should create more up-pressure on the markets because there are more buyers than sellers.  However, actual data shows that this isn't the case.

Pooperman

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Re: Question for the Future
« Reply #20 on: November 02, 2015, 03:40:17 PM »
Given projected demographic shifts in developed (and many developing) nations, how will the stock markets respond? My feeling is that the overall, the market will grow (after inflation) roughly in proportion with the growth of the working-age population.

Do you have any data that supports this feeling?

It seems like a subset of the "stock market returns are a function of the growth in GDP" argument that makes no sense and has been demonstrated to not be true.

If demographics change where people in retirement age grows considerably, there's down-pressure on the markets from more sellers compared to buyers. The inverted population demographics in many countries will cause poor returns in those markets until normalcy returns.

Again, do you have any data for this?

The converse to your argument is that population booms should create more up-pressure on the markets because there are more buyers than sellers.  However, actual data shows that this isn't the case.

Show me data? I've seen cherry-picked data on both sides on this. Some show correlation (not causation), some show no correlation.

beltim

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Re: Question for the Future
« Reply #21 on: November 02, 2015, 03:52:59 PM »
Show me data? I've seen cherry-picked data on both sides on this. Some show correlation (not causation), some show no correlation.

There's a lot.  I like this paper as an introduction, particularly Figure 1:
https://www.msci.com/documents/10199/a134c5d5-dca0-420d-875d-06adb948f578


But the easiest argument is from first principles:  suppose you have a company with constant earnings, which will never go up or down.  How much should you pay for that company?  If your answer is more than 0, you don't believe that the only determinant of stock prices is growth.

Pooperman

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Re: Question for the Future
« Reply #22 on: November 02, 2015, 03:54:35 PM »
Show me data? I've seen cherry-picked data on both sides on this. Some show correlation (not causation), some show no correlation.

There's a lot.  I like this paper as an introduction, particularly Figure 1:
https://www.msci.com/documents/10199/a134c5d5-dca0-420d-875d-06adb948f578


But the easiest argument is from first principles:  suppose you have a company with constant earnings, which will never go up or down.  How much should you pay for that company?  If your answer is more than 0, you don't believe that the only determinant of stock prices is growth.

Does the company give a dividend?

beltim

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Re: Question for the Future
« Reply #23 on: November 02, 2015, 04:04:29 PM »
Show me data? I've seen cherry-picked data on both sides on this. Some show correlation (not causation), some show no correlation.

There's a lot.  I like this paper as an introduction, particularly Figure 1:
https://www.msci.com/documents/10199/a134c5d5-dca0-420d-875d-06adb948f578


But the easiest argument is from first principles:  suppose you have a company with constant earnings, which will never go up or down.  How much should you pay for that company?  If your answer is more than 0, you don't believe that the only determinant of stock prices is growth.

Does the company give a dividend?

It doesn't matter, for this reason: if it's undervalued, someone will buy enough shares to take control of the company and institute whatever dividend you want.

Pooperman

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Re: Question for the Future
« Reply #24 on: November 02, 2015, 04:05:17 PM »
If the company has no profit and no loss and never would, the value of a share should equal its total book value by the number of shares. If the company was worth $100, had no profit, and there were 10 shares, each would be $10. If the company had a profit, the value of the company would rise by the profit multiplied by some forward amount, like 30, and therefore the value of the shares (provided there's no dividend). A company worth $100 with a profit of $5/month and 10 shares, the shares would be worth about $25 each assuming the profit would not change. The price would rise by $0.50 every month as well.

This is removing irrationality (which exists) as well as inflation, market cycles, or any sort of change in general.

So I think what you're getting at is that, by virtue of having a profit, the market will always rise?

beltim

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Re: Question for the Future
« Reply #25 on: November 02, 2015, 04:09:48 PM »
So I think what you're getting at is that, by virtue of having a profit, the market will always rise?

Basically, yes.  Or more accurately, over the very long term, what drives investment returns is profits.  Growth and changes in P/E and all sorts of other things dominate the price action in the short term, but over the long term, what matters is profits.

The "market" doesn't always have to rise, because all of the profits could be paid out as dividends, and so the investment return would come from dividends, but the basic idea is the same.

Pooperman

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Re: Question for the Future
« Reply #26 on: November 02, 2015, 04:12:52 PM »
So I think what you're getting at is that, by virtue of having a profit, the market will always rise?

Basically, yes.  Or more accurately, over the very long term, what drives investment returns is profits.  Growth and changes in P/E and all sorts of other things dominate the price action in the short term, but over the long term, what matters is profits.

The "market" doesn't always have to rise, because all of the profits could be paid out as dividends, and so the investment return would come from dividends, but the basic idea is the same.

Total return is what I meant specifically by growth, but yeah. Now I get you :). Whether stock buybacks, dividends, or just appreciation, the total is proportional to profits when you remove the noise.

beltim

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Re: Question for the Future
« Reply #27 on: November 02, 2015, 04:21:41 PM »
So I think what you're getting at is that, by virtue of having a profit, the market will always rise?

Basically, yes.  Or more accurately, over the very long term, what drives investment returns is profits.  Growth and changes in P/E and all sorts of other things dominate the price action in the short term, but over the long term, what matters is profits.

The "market" doesn't always have to rise, because all of the profits could be paid out as dividends, and so the investment return would come from dividends, but the basic idea is the same.

Total return is what I meant specifically by growth, but yeah. Now I get you :). Whether stock buybacks, dividends, or just appreciation, the total is proportional to profits when you remove the noise.

Exactly.