Theoretical value of non-dividend stock

[DeepState]

Dividend or no dividend does not affect the value of a company.

.

Nice arguments.

The thesis behind your opening statement is the Modigliani Miller Theorem. They developed it in 1958. It contained the beautiful arguments you outlined. However, it has ultimately been set aside. Dividends do matter and affect stock prices empirically (I don't want to say...in the real world, as it might seem you are not there already).

Nonetheless, Modigliani got a Nobel in 1985. Your's might be coming.

 

[springhill]

Utterly fascinating viewpoint and incredibly reasonable despite initially seeming alien - you must read heaps and have a massively open mind.

Either that or the cynic in me is growing ever stronger with each day that passes.

Please help me out. If there is only a single country which does not trade of have capital movement with another....is it's currency anchored? What if the money supply was fixed? What if money consisted of Gold or other precious substance of fixed supply? Or are you saying that because the price of Guns or Butter changes in the numeraire of the currency, that this makes it unanchored? I'm probably way off and hence hoping for direction.

Not possible, if a completely insular country has unavoidable population growth you automatically have more people chasing their own share of what they believe they need of a 'fixed' amount of currency to survive. Some believe that they need more than others.
To gain more currency citizens begin trading other objects of value. Theoretical value and speculation now enter the system, with the usual initial catalysts being the essentials of life - food & water, and then flowing on to lesser needs, wants and luxury items......

In essence, you have hit the nail on the head - changes in the value of needs & wants ultimately leads to the speculation and theoretical value flowing through to fiat currency or an alternative precious metal.

In essence countries have multiple currencies, they are just not officially recognised as such.

For example drawing on my food production job, the values of a Chilean plum and an Australian plum in Singapore are vastly different.
As the Australian plum can be compared to a foreign plum and has earning potential or a tradeable value, does this not make it a form or currency open to theoretical value.....

I hope this made sense to you, in mind head it did. I just may not have converted it via keystroke in the best manner.

 

[McLovin]

Nice arguments.

The thesis behind your opening statement is the Modigliani Miller Theorem. They developed it in 1958. It contained the beautiful arguments you outlined. However, it has ultimately been set aside. Dividends do matter and affect stock prices empirically (I don't want to say...in the real world, as it might seem you are not there already).

Nonetheless, Modigliani got a Nobel in 1985. Your's might be coming.

Yes, it's that pesky old Yogi Berra saying: In theory there's no difference between theory and practice; in practice there is.

MM does a great job of explaining how things should work, not how they do work.

 

[DeepState]

Yes, it's that pesky old Yogi Berra saying: In theory there's no difference between theory and practice; in practice there is.

MM does a great job of explaining how things should work, not how they do work.

Touche McLovin. We should go for a ride in a cop car one day.

 

[DeepState]

Either that or the cynic in me is growing ever stronger with each day that passes.



Not possible, if a completely insular country has unavoidable population growth you automatically have more people chasing their own share of what they believe they need of a 'fixed' amount of currency to survive. Some believe that they need more than others.
To gain more currency citizens begin trading other objects of value. Theoretical value and speculation now enter the system, with the usual initial catalysts being the essentials of life - food & water, and then flowing on to lesser needs, wants and luxury items......

In essence, you have hit the nail on the head - changes in the value of needs & wants ultimately leads to the speculation and theoretical value flowing through to fiat currency or an alternative precious metal.

In essence countries have multiple currencies, they are just not officially recognised as such.

For example drawing on my food production job, the values of a Chilean plum and an Australian plum in Singapore are vastly different.
As the Australian plum can be compared to a foreign plum and has earning potential or a tradeable value, does this not make it a form or currency open to theoretical value.....

I hope this made sense to you, in mind head it did. I just may not have converted it via keystroke in the best manner.

I (think I) get where you are coming from. Thanks for the response. Very much.

To pursue, if there is no single base currency because we are living in an Einstein-ian world of relative value, why is it that you conclude that things (ie. some stock that pays or doesn't pay dividends etc.) have no value? If we agree that something can be traded for another, whether in the presence of speculation or not, can't we say that Berkshire Hathaway is trading at 200 Australian plums today and, given plums/food are necessary for life, that it has value? That's the part that puzzles me most....that the argument asymptotes to zero value. I don't get that part. It seems like a sequi non to me, but I'm clearly missing something - what?

This is an utterly fascinating shift of reference frame which you have tabled - thank you. Is this whole economy a charade which greases its mechanism via trade in sheets of paper and electronic versions of it? I'm not going to argue the against case too strongly.

Best