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[warpus]

Generally increasing stock prices. E.g. the US equity markets since March 2009.

Makes sense, thanks.

Since markets are sort of driven by people who own stocks - and want to see profits - would it be reasonable to assume that a market that doesn't have generally increasing stock prices aka a bull market - isn't "healthy"?

Or am I making too many assumptions?

Is perpetual growth a reasonable assumption?

 

[Godwynn]

Makes sense, thanks.

Since markets are sort of driven by people who own stocks - and want to see profits - would it be reasonable to assume that a market that doesn't have generally increasing stock prices aka a bull market - isn't "healthy"?

Or am I making too many assumptions?

Is perpetual growth a reasonable assumption?

This is getting more academic & philosophical than practical, but these are still important questions. Breaking it down, there are two ways equity securities, henceforth called stocks, deliver returns to their owners. The first, as we are currently discussing, is through higher prices. Buy a stock today at $50, sell it tomorrow at $60, $10 gain. Easy-peasy.

The second way is through dividends. I will only concentrate on cash dividends. Firms distribute cash dividends to the owners of their stocks. In its most simplistic form, think of the cash the company has left over after paying all expenses. The company can give the cash to its owners and is also calculated in the return. In the example above, the company pays a $10 dividend on each of its shares. The share price is reduced to $50 and the owner receives $10.

The holding period return in both is exactly the same, 20%. At the end of the day, the stock price in example 1 is $60, the stock price in example 2 is $50. It's just a difference between how the returns are received.

Regarding the second part of your post. A "healthy" (subjective term) market doesn't always have to increase prices, if it is delivering cash dividends. Remember in example 2, the stock price is exactly the same, but the owner still received the same return.

It doesn't have to have perpetual stock price growth. Utility companies are a good example of this. They don't deliver great capital gains (stock price increases) but continually have good dividend yields to their owners.

Let me know if you have more questions.

 

[warpus]

Interesting, thanks. My only background to all this is an intro to econ 101 course I took like 20 years ago.

 

[Birdjaguar]

This is getting more academic & philosophical than practical, but these are still important questions. Breaking it down, there are two ways equity securities, henceforth called stocks, deliver returns to their owners. The first, as we are currently discussing, is through higher prices. Buy a stock today at $50, sell it tomorrow at $60, $10 gain. Easy-peasy.

The second way is through dividends. I will only concentrate on cash dividends. Firms distribute cash dividends to the owners of their stocks. In its most simplistic form, think of the cash the company has left over after paying all expenses. The company can give the cash to its owners and is also calculated in the return. In the example above, the company pays a $10 dividend on each of its shares. The share price is reduced to $50 and the owner receives $10.

The holding period return in both is exactly the same, 20%. At the end of the day, the stock price in example 1 is $60, the stock price in example 2 is $50. It's just a difference between how the returns are received.

Regarding the second part of your post. A "healthy" (subjective term) market doesn't always have to increase prices, if it is delivering cash dividends. Remember in example 2, the stock price is exactly the same, but the owner still received the same return.

It doesn't have to have perpetual stock price growth. Utility companies are a good example of this. They don't deliver great capital gains (stock price increases) but continually have good dividend yields to their owners.

Let me know if you have more questions.

When dividends are issued to shareholders, it does not directly affect stock price. In market theory the fact that a stock pays dividends is taken into consideration by investors and may increase the value of the stock in the eyes of investors. Take apple. Last year it paid dividends and its price has continued to rise. Apple stock owners made money as the stock price rose and made more money every quarter that dividends were paid out.

In the past 12 months Apple has gone from $76/share in March 2014 to $124/share today. Since last July the company has paid $0.47/share in dividends three times.

Bull markets (in stocks) are long periods of upward growth as has been stated. They generally provide the easiest financial rewards if you pick the right stocks. In March of 2014 1,000 shares of apple would have been worth $76,000* today the same 1,000 shares are valued at $124,000. That is a gain of $48,000. In the same period, the owner of those 1,000 shares would have received $1,410 in dividends in addition. The dividends though are cash in your pocket. The $48,000 is a paper profit until you actually sell the stock, at which time you may have to pay taxes on those gains. Or perhaps more likely, you will continue to hold the stock thinking it will go up forever. Then when it doesn't and drops back to $98/share you kick yourself.

*Prices are adjusted to reflect June's 7-1 stock split.

 

[Godwynn]

When dividends are issued to shareholders, it does not directly affect stock price. In market theory the fact that a stock pays dividends is taken into consideration by investors and may increase the value of the stock in the eyes of investors. Take apple. Last year it paid dividends and its price has continued to rise. Apple stock owners made money as the stock price rose and made more money every quarter that dividends were paid out.

In the past 12 months Apple has gone from $76/share in March 2014 to $124/share today. Since last July the company has paid $0.47/share in dividends three times.

Hi Birdjag!

As mentioned previously in my post to warpus, this is an academic approach and is simplified for the benefit of the audience.

The current stock price is the current market expectation of discounted future cash flows. Cash flows meaning dividends. The stock itself is worthless if it doesn't transfer the profits to its owners.

With this in mind, a cash flow at the present time is the current dividend. This is why is it seen that on the ex-dividend date, not the actual date of payment, the share price is adjusted by roughly the amount of the dividend. I say roughly because there is always new information the market is taking into consideration and just random noise. AAPL can still rise in price, despite the dividends, because the market is constantly upping the expected future cash flows from it.

If the share price wasn't adjusted, I would sit at home all day buying shares on the ex-dividend date and sell it immediately the next day so I could take the dividend and not lose on the price.

 

[Birdjaguar]

Thanks Godwyn. I respect your academic approach to the issue. My post was a simple layman's explanation of how an unschooled investor would see things. I apologize for stepping on your toes.

 

[Kyriakos]

Why not get paid for what you like to do? You get money and you like doing whatever it is you get paid for.

Likely very rare to happen. Even professions like uni professors soon get to the job being boring/repetitive, despite supposedly being what they like to think/write about anyway.

There can be other issues too. I mean i am sure i would also dislike having to work for 6-7 or more hours a day each day apart from Sunday, but it is also strenuous to work for a few hours a week when presenting a seminar and have to speak for virtually the entire duration, to groups of people. Better in my view than manual labor, but still it is a job and it is done mostly so as to have a wage.. 4 hours of the philosophy stuff is not much fun either, y'know (i mean for me, for the others likely it is less fun, but sometimes more ).

 

[Loppan Torkel]

Assume you're working in a place where there's a slight risk for aggressive behaviour and violence from the clients. A minor risk, but not entirely negligible. You're practically the only male around and you're specifically the one who people will depend on if a situation should arise.
Let's also assume you live in a nation that's gotten further than your current in gender equality. People are expected to and also really do contribute equally in other chores. What is this kind of protection worth? How much would you go for in the next wage discussions for this specific competence?

 

[nc-1701]

I know IT is loaded with money but isn't that a significant waste of your skills? Unless you want to make some bank first before deciding to pursue doing what you like which isn't such a bad call.

It is, but what else would I do? I'm not smart enough for cutting edge theoretical research at a Uni, finance would be similar money for more hours, and I'm not quite altruistic enough to take a 50% pay cut to teach.

 

[Narz]

Being a movie extra is not a bad side gig. Really easy work, kinda dull most of the time (lot of standing/sitting around) but you get to socialize, meet new people, overtime pay if shoot goes too long, pretty decent free food, if you live in a big city you can do it quite a few days a week if you want. I got to do stand-in/hand double for the lead actor too, watched a stuntman do a couple takes of getting hit by a cab (I think he got paid $2,000 per take, I would want more than that!).

 

[Borachio]

Has anyone thought of being a model for a Life Class?

(I'm thinking out of the box, here. Obviously.)

 

[Narz]

I've been an artist model before. It's really dull & tiring work (you have to stand totally still) & doesn't pay that well. On the other hand you literally have to do nothing.

 

[caketastydelish]

Being a movie extra is not a bad side gig. Really easy work, kinda dull most of the time (lot of standing/sitting around) but you get to socialize, meet new people, overtime pay if shoot goes too long, pretty decent free food, if you live in a big city you can do it quite a few days a week if you want. I got to do stand-in/hand double for the lead actor too, watched a stuntman do a couple takes of getting hit by a cab (I think he got paid $2,000 per take, I would want more than that!).

Even an extra would need some experience surely? Or could you just go without even some theater classes of instruction or whatever.

 

[Narz]

Depends on the role, most people already have experience being a pedestrian.

 

[BirraImperial]

Being a movie extra is not a bad side gig. Really easy work, kinda dull most of the time (lot of standing/sitting around) but you get to socialize, meet new people, overtime pay if shoot goes too long, pretty decent free food, if you live in a big city you can do it quite a few days a week if you want. I got to do stand-in/hand double for the lead actor too, watched a stuntman do a couple takes of getting hit by a cab (I think he got paid $2,000 per take, I would want more than that!).

Sounds interesting...You get to meet people and get paid for basically just doing nothing ?

 

[Narz]

You have to do what they tell you to do, often a dozen times, it's a bit tedious. Also you often have to get up very early (my first call time was 6am).

 

[Hygro]

A while back a friend of mine achieved an Adonis body, straight flawless.

He says to me "yeah, but I want to get bigger."

I'm like, "yo, dude, women don't want that"

He's all "It's more for men. I want to walk into board rooms big"

Gey money or meh?