Stock tips!

[YourMotherShouldKnow]

Anyone here making some $$$ in the market?

 

I own a few biotech companies and they've done well for me. No 10 baggers yet but I've made a nice profit since 2002.

 

Right now, I'm taking a look at Macromedia (MACR) which makes Dreamweaver and a bunch of other web development software. I haven't bought any but they're interesting to me. Also, there's a French company called Ingenico. They make the little credit card swipers at the Wal-Mart check-out stand. I don't even know how to buy Ingenico if I decide I want to 'cause they're not on an American exchange.

 

Anyone got any hot companies? Remember, if you start with 1000 bucks and double it 10 times you got yourself $1,000,000. That's do-able!

[Ed A.]

I bought 5000 shares of Sun Microsystems (SUNW) now when it's cheap. Indications from analysts are that it will break out soon. Another could be Lucent Technologies (LU), I was debating buying a couple years ago when it hit $0.70, it closed at $4.48 (still cheap) on Friday. Telcom is making a come back along with IT spending as the economy starts picking up. Microsoft (MSFT) is questionable though, due to the pending EU ruling, plus their PE (34) is somewhat high and they're not what I'd call a growth company anymore.

[Raymar]

A couple months back, due to a tip, I bought 4,000 shares of Baltia Airlines at $.20 per share and its been just hovering there. They will start flying early this year, probably this month flights out of JFK to Russia(the only airline to do this without any stops).

 

I know airlines aren't doing that well these days, the larger ones anyway because they deregulated the prices and treat people like cattle, and now threats of overseas jets for 9-11 style landings here in the US. But people still have to do business travel. So anyway I'm waiting for it to go up to $10 or $20 per share then cash out. May be awhile.

 

Steve

[Zweite Version]

How are you guys buying? A traditional broker or one of the internet accounts like Ameritrade?

Any experiences with online brokers?

The low trading fees they offer seem tempting.

[Ed A.]

I use a local discount broker in Connecticut called People\'s Securities .

[Kendrix]

Im into some mutual funds and diversify diversify diversify.

 

Ive never done all that well trying to pick specific stocks-. Yeah there are a few winners i could poiint to - but I have at least as many unhappy outcomes.

 

Unless you have the know-how and time to really investigate specific picks (I dont) a diversified strategy is generally considered the best way to go.

 

FWIW-

Cash register person in a store

Q: " So are you all set?"

 

Me:

A: I just need a million dollars and then Ill be all set.

 

This usually gets a smile.

[Ed A.]

My experience with mutual funds was not very profitable. I get the impression that many fund managers don't have a clue as to what stocks are right for their funds. Sometimes I think that a trained monkey throwing darts at a stock list would do just as well as some of these managers. Diversity is safe, but it doesn't help much if all your mutual funds are a wash between losses and gains. You won't make any money by just breaking even. Individual stocks can be much more profitable, but obviously much riskier.

[Duddits]

Now, I may just be a cat, but ...

 

Netflix

[Ed A.]

Netflix: PE: 406.72 Current price: $73 per share. Trading at almost 407 times earnings? Think I'll pass on this one

[sbrock1san.rr.com]

AU Optronics(ADR) They make LCD display panels for computers, notebook computers, PDAs, digital camcorders, televisions, etc. Strong revenue growth and a killer application. Symbol AUO

 

I am a big believer in index funds and ETFs (exchange traded funds). S&P 500 index, S&P Mid Cap 400 index, Nasdaq 100 index. A great way to invest and no mutual fund manager to screw it up. Someday the Nasdaq will be at 10,000 and you will remember this post

[Phil B]

Originally posted by php:

Sometimes I think that a trained monkey throwing darts at a stock list would do just as well as some of these managers.

Actually, the Wall Street Journal has been proving this with their dartboard columns over the years where they pit an "experts" pick against the throw of a dart blindly against the stock listing pages. Generally, the dartboard wins half the time.

 

Mutual funds are a scam. The loads and management fees will leave you a point or two below historical averages. The key to diversification is to purchase index funds, either total market, or a large cap and a small cap, etc. This way transaction costs are kept to a bare minimum (for example, the only time an S&P 500 index fund will make a trade, basically, is to sell stocks that fall off the index and purchase those that join it). You can find a lot of these with no-loads (commissions when you buy and sell) and the lowest management fees you will find. This way you invest in the economy and earn an "average return." Then you take the rest of your investment money and "go shopping" for stocks, with your diversified portfolio intact. Granted, this is not the most aggresive strategy, but you are getting a piece of every upside without losing everything on the downside ... your individual stock picks are the potential gravy. Also, depending on your age, you may want to diversify past the stock market (e.g., fixed income securities) or depending on your wealth, you may want to take on some more risk for the chance of greater returns (e.g., options trading).

 

And, another lesson I've learned (the hard way) ... if you have a nice chunk of change you are ready to invest, don't do it all in one day ... spread out your investments in time a little so you don't get killed by a big drop off. You can't time the market. Don't bother trying. The people with the best information (wall street analysts, etc. - although they have less of an advantage than they used to, they still do this full time and can call a CFO on the phone if they want) and the most money have already moved the market before you'll ever get a "hot tip" (unless it's insider trading, in which case, it's definitely not worth the risk of jail and a million dollar fine you'll be paying off the rest of your life).

 

That was a long post! Sorry.

[BP3]

Take a look at Celsion (CLN).

[YourMotherShouldKnow]

Originally posted by SteveRB:

AU Optronics(ADR)

Correction: The "cymbal" (I kill me!) for this is AUO

[Kendrix]

Originally posted by Phil B:

Originally posted by php:

[qb]Mutual funds are a scam. The loads and management fees will leave you a point or two below historical averages. .

This depends on the particular fund.

Some are much better/worse than others.

There are several that have demonstrated an abilty to outrun the index's fairly consistently over the long haul.

 

I agree with your point about averaging into the market over time- not dropping all your cash at once.

 

Good luck

[YourMotherShouldKnow]

Peter Lynch did pretty well with his Magellan mutual fund.

[Ed A.]

Originally posted by SteveRB:

I am a big believer in index funds and ETFs (exchange traded funds). S&P 500 index, S&P Mid Cap 400 index, Nasdaq 100 index. A great way to invest and no mutual fund manager to screw it up. Someday the Nasdaq will be at 10,000 and you will remember this post

I agree. I sold some mutual funds and put the money into the Nasdaq 100 index (QQQ) and it's doing a whole lot better than the mutual funds did.

[Phil B]

Originally posted by LanceMo:

Peter Lynch did pretty well with his Magellan mutual fund.

The relevance of historical performance is open to debate. Some (like me) would say that Lynch was just a statistical outlier at the slot machines (i.e,. if enough people play the slots, someone will win the jackpot -- were they necessarily more "skilled" than anyone else). The key is to be able to pick who will win the jackpot NEXT year, and as the warnings say "past performance does not predict future results."

[YourMotherShouldKnow]

Originally posted by Phil B:

Originally posted by LanceMo:

Peter Lynch did pretty well with his Magellan mutual fund.

The relevance of historical performance is open to debate. Some (like me) would say that Lynch was just a statistical outlier at the slot machines (i.e,. if enough people play the slots, someone will win the jackpot -- were they necessarily more "skilled" than anyone else). The key is to be able to pick who will win the jackpot NEXT year, and as the warnings say "past performance does not predict future results."

I don't disagree wit you Phil B. Peter Lynch is not only brilliant but he's also a rare exception. I'd go with QQQ in a heartbeat. I expect it will be at 100 easily in a few years. The good thing about mutual funds is that you know the fund manager is trying his ass off. That's way better than a lot of brokers who just push whatever their company is pushing.

 

I don't find mutual funds to be a scam but I don't see them as any great shakes either.

[philbo_Tangent]

Whenever the market is weak (as it has been for the last 2 - 3 years), this has worked well for me:

"Buy only what everyone else is desperate to sell, and sell only what everyone else is desperate to buy."

 

When the market is strong, any idiot can make money at it. Just buy & hold stocks in non-corrupt companies that pay dividends. Then use ONLY dividends to buy other stocks of similar type.

[Super 8]

Originally posted by philbo_Tangent:

"Buy only what everyone else is desperate to sell, and sell only what everyone else is desperate to buy."

This sounds like good advice.

 

I never could wrap my brain around the stock market. So much terminology and science and voodu.

 

I'm surprised this thread didn't gain more momentum than it did.

 

How many people here invest, or understand stocks?

 

How many don't?

 

For me, I think the stock market would be an excellent way to piss away a whole lotta $$$, on some half-assed notions of what will work and what won't.

 

Does anybody know of any 'investment simulator software'? Something that would let a guy learn how to play the market with pretend money and see what works and what doesn't?

 

This seems like it would be a great teaching tool -if it existed.... Kind of like a flight sim. You can crash, and no one dies!

[Lee Flier]

Personally I think the stock market is probably mankind's most evil invention ever, and will have nothing to do with it. Nor will I work for publicly held companies, nor would I ever take a business I owned public.

[YourMotherShouldKnow]

Originally posted by Lee Flier:

Personally I think the stock market is probably mankind's most evil invention ever

Why Lee? Can you tell me, briefly, why you think this way?

[BP3]

Lee, I would venture to say that Bose, Gibson and the owners of this forum are likely public held companies.

[Philter]

Originally posted by Super 8:

 

Does anybody know of any 'investment simulator software'? Something that would let a guy learn how to play the market with pretend money and see what works and what doesn't?

 

This seems like it would be a great teaching tool -if it existed.... Kind of like a flight sim. You can crash, and no one dies!

Hey Super,

 

yes, I do know of one, and it's free, realtime, and uses the actual market.

 

http://game.marketwatch.com/Home/default.asp

 

They give you $1,000,000 to mess with, and track how you do.

 

I found that I did better leaving the million in the bank and just collecting interest. Once I started buying stocks, I lost my shirt.

 

However, 14 months ago I almost bought some Netflix stock, and I would have made a killing if I had then. Now it's too much. I had signed up for their service and it's way, way better than Blockbuster or anything like that. So now I'm just keeping an eye open for other cool ideas like that.

[Lee Flier]

Tinder, Bose is privately held. And I don't work for the company that owns these forums.

 

Gibson didn't get any of my money directly either, considering my Gibsons were, errhh, slightly used when I got 'em. Anyhow, I never said I don't buy any products made by public companies, although I try to make a special effort to patronize local and small privately held companies.

 

Lancemo, to try and be as brief as possible, there are a lot of problems with the stock market but the biggest one is that once a business goes public, they are no longer in control over their own destiny. The company's decisions often have to be made based on what will be most profitable in the short term rather than what's best in the long run for the quality of the product or service, the employees of the company, and the community in which the company resides. By the time a company has been public for 10 to 20 years, many of the stockholders become people who have no vested interest in the company other than whether its stock value goes up or down. If it goes up, the stockholders are happy regardless of what insanely harmful measures had to be taken in order to make it go up. If it goes down, and any stockholders consider that the company didn't do something to make it profitable (regardless of how unethical that "something" may be), the board can sue the company.

 

Sure, it's possible for a private company to be just as ignorant of anything but the bottom line as a public one. But they at least have the option not to be. Rather than having to pay out dividends, a private company can re-invest its profits as it chooses. Bose chooses to re-invest 100% of its profits into research, something a public company could never get away with. One client of mine, a very large international privately held company, invests much of its money back into the company in the form of employee training and benefits, making the workplace better, charities that benefit the communities where they do business, etc. Again, not something you see in any large public company where most of the employees are working in tiny drab cubicles (or farming work out to even more miserable sweatshops in other countries where those are legal) and rampant cost cutting is the order of the day.

 

As consumers, people like to bitch about poor product quality and poor service, environmental destruction by businesses, massive layoffs, etc. But as stockholders, the same people look at the numbers holding steady or rising and are happy, and don't make the connection.

 

I could go on for awhile about this topic, but that's the Reader's Digest version.

[Kendrix]

Originally posted by Lee Flier:

Tinder, Bose is privately held. And I don't work for the company that owns these forums.

 

Gibson didn't get any of my money directly either, considering my Gibsons were, errhh, slightly used when I got 'em. Anyhow, I never said I don't buy any products made by public companies, although I try to make a special effort to patronize local and small privately held companies.

 

Lancemo, to try and be as brief as possible, there are a lot of problems with the stock market but the biggest one is that once a business goes public, they are no longer in control over their own destiny. The company's decisions often have to be made based on what will be most profitable in the short term rather than what's best in the long run for the quality of the product or service, the employees of the company, and the community in which the company resides. By the time a company has been public for 10 to 20 years, many of the stockholders become people who have no vested interest in the company other than whether its stock value goes up or down. If it goes up, the stockholders are happy regardless of what insanely harmful measures had to be taken in order to make it go up. If it goes down, and any stockholders consider that the company didn't do something to make it profitable (regardless of how unethical that "something" may be), the board can sue the company.

 

Sure, it's possible for a private company to be just as ignorant of anything but the bottom line as a public one. But they at least have the option not to be. Rather than having to pay out dividends, a private company can re-invest its profits as it chooses. Bose chooses to re-invest 100% of its profits into research, something a public company could never get away with. One client of mine, a very large international privately held company, invests much of its money back into the company in the form of employee training and benefits, making the workplace better, charities that benefit the communities where they do business, etc. Again, not something you see in any large public company where most of the employees are working in tiny drab cubicles (or farming work out to even more miserable sweatshops in other countries where those are legal) and rampant cost cutting is the order of the day.

 

As consumers, people like to bitch about poor product quality and poor service, environmental destruction by businesses, massive layoffs, etc. But as stockholders, the same people look at the numbers holding steady or rising and are happy, and don't make the connection.

 

I could go on for awhile about this topic, but that's the Reader's Digest version.

Hmm, I respectfully disagree with you on this Lee.

 

The stock market does not cause mangement to lose control of the company and skew the short-term - long -term balance as it makes decisions. It's the stupid executive compensation schemes approved by the boards that are often "short sighted" and that do this. With the right executive comp plan the managers will make the right decisions based on a balanced view.

 

Its true that public companies may be owned mainly by pure financial investors who have no other interest in the company. This does not mean that it is in any companies interest to do evil on behalf of profits. Most companies consider their brand - their reputation - their goodwill with the buying public - to be of very great value. Any damange to this represents a great risk to the business.

In this way profitability is dependant on being good citizens of the world. Its self governing to be constrained to what most folks think is reasonable behavior. If you think most folks are incompetant to decide this - well then who should decide for them? Such an arrangement would be very dangerous and likely be counter productive in an economic sense. You may disagree with the collective judgment the market applies - but this is not evidence that there is a better system - or even that the current judgments represent poor tradeoffs.

 

Finally, and perhaps most important, is the tremendous benefit to all mankind that has resulted from the capital markets ability to direct resources to beneficial activities.

Its easy to point out some shortcomings of this system - but there simply is no better system for directing capital to the benefit of us all.

Thats why the US is so much wealthier than the rest of the world. This is why we are healthy and live more comfortable lives on average.

Centrally planned economies proved they are inept at this. They never did produce any Capital records, Fenders, Yamahas, Ciscos, Dells, Sony's. They never produced agricultural innovation to match that which free economies produced. Nor the pharmaceuticals or medical innovations that are extending everyones lives.

 

Without capital flows enabled by the stock market we'd all be living shorter and less comfortable lives - by allot.

 

Maybe our spiritual side could be better developed on average- but this is a seperate issue.

 

Purely private companies are not the answer either.

 

If one day you invented some incredible item that could be of tremendous help to the entire world- you'd need external capital to be able to expand your business quickly so you could share the benefits with the rest of the world. Otherwise, your growth would be capital-limited thereby negatively impacting the benefits.

 

I challenge anyone to describe a better model that addresses these points.

 

BTW- we may have just strayed into the "polital thread zone"

[Lee Flier]

Originally posted by Kendrix:

Its true that public companies may be owned mainly by pure financial investors who have no other interest in the company. This does not mean that it is in any companies interest to do evil on behalf of profits. Most companies consider their brand - their reputation - their goodwill with the buying public - to be of very great value. Any damange to this represents a great risk to the business.

Ha! In whose utopian world? Most companies are simply trading on their PAST good reputations by the time they've been public for 10 to 20 years.

 

In this way profitability is dependant on being good citizens of the world. Its self governing to be constrained to what most folks think is reasonable behavior.

Uhhh... a closer look into the actions of corporations would tell you that you're seriously deluded if you believe this. Do you really feel that most public corporations conduct themselves ethically?

 

Finally, and perhaps most important, is the tremendous benefit to all mankind that has resulted from the capital markets ability to direct resources to beneficial activities.

Its easy to point out some shortcomings of this system - but there simply is no better system for directing capital to the benefit of us all.

Thats why the US is so much wealthier than the rest of the world. This is why we are healthy and live more comfortable lives on average.

Actually there are quite a few European based companies who are not public and whose interests are not so relentlessly bottom-line oriented as those in the U.S. My aforementioned client (based in Sweden) is one of them. Europe on average has shown a greater willingness than we have to experiment with different business models, and their quality of life doesn't seem to be suffering any.

 

 

Without capital flows enabled by the stock market we'd all be living shorter and less comfortable lives - by allot.

 

Maybe our spiritual side could be better developed on average- but this is a seperate issue.

Ken, that sounds like a pretty snide remark to me. The damage being done by the stock market and unbridled capitalism has been harmful to way more than our "spiritual development," and in fact, if we don't do something about it, we'll be back to living much shorter and less comfortable lives.

 

Capitalism is a good thing up to a point, but like anything else, too much of a good thing is as bad or worse than too little. We are now getting past the point where it's a good thing. That doesn't mean we go to the other extreme either, it just means that we need to revisit the ways we do business.

 

Purely private companies are not the answer either.

 

If one day you invented some incredible item that could be of tremendous help to the entire world- you'd need external capital to be able to expand your business quickly so you could share the benefits with the rest of the world. Otherwise, your growth would be capital-limited thereby negatively impacting the benefits.

Hold on there... I never said that I disapproved of ANY capital flow or that I thought "planned economies" were the answer. It's very funny that an attack on the stock market is perceived that way.

 

It's pretty simple really - if you need to raise a lot of capital quickly, you can offer bonds only. Bonds are more conservative in their returns than stocks, but their term is finite. Once you pay back your bondholders you aren't beholden to them anymore; they don't own you forever. If your invention is that great, you should have no trouble attracting bondholders. If you're just looking to get rich quick and your product has little real value, you'll have trouble finding investors. That's as it should be.

 

A company should be able to grow as much as it needs to in order to fund the development of its products or services adequately, advertise and distribute it to anyone who wants it. They should have enough money to pay competent people, and give those people incentive to stick around. Most definitely. Beyond that point, growth often becomes cancerous. Publicly held companies usually live in a corporate culture that says growth is IMPERATIVE, which is a very different thing than going through occasional periods where growth is necessary. Yet, nobody teaches you in business school how to stop growing, nor how to determine when you've reached peak performance as a company and SHOULD stop growing before you have to resort to harmful practices.

[Super 8]

Originally posted by Philter:

Hey Super,

 

yes, I do know of one, and it's free, realtime, and uses the actual market.

 

http://game.marketwatch.com/Home/default.asp

 

They give you $1,000,000 to mess with, and track how you do.

 

Thanks, bro! I'll look forward to checking it out and seeing how fast I can piss away a million bucks!

 

Heh, heh, heh....

[Kendrix]

Lee,

 

Good points.

 

I'll tell you that I work in a large corpoation that has had some ethical issues in the recent past. Since then we have invested big bucks on ethics training. We created a corporate ethics board chaired by a very senior executive. Weve updated all our ethics policies. The pendulum has swung way overboard IMHO.

 

So, based on personal experience i do really believe that corporations find it in their interest to maintain ethics that will be viewed favorably by the general population.

 

Yes- there are very visible cases that depart from this- But I beleive they are not the general rule. So, I acknowledge that corporate crinimals do exist. However, I do not think I'm "deluded" here. Ive experienced it personally. (Hell even CBS found it necessary to publically appologize cause Outkast wore some Indian garb at the grammies. Thats how sensitive things have gotten- the markets "working"!)

 

Truly did not mean to be snide w.r.t my comment on spiriutality. I just wanted to make the point that business is not the means for addressing such items. Some folks seem to want to mix the two.

 

As for bonds/not stocks being the answer.

Its a fact that the cost of capital to a firm is lowest when a mix of stocks and bonds is used.

Bonds are typically secured via some collateral.

When a firm is starting out they dont have enough assets to support a large bond offering. If they went 100% bonds- beyond a certain point they would end up haveing to pay very large interest rates for them. The obligation to pay cash out in interest can literally kill a small company in high growth mode and who needs to re-invest all those dollars.

 

Here is where the strength of stocks comes into play. There is no required cash flow to the stock holders.

 

Interestingly, the imperative to have to grow seems rampant. However, it is not universal. Stock holders do not alway drive this.

For example, Kodak (not my company) recently announced an aggressive strategy to invest in digital technologies to counteract the decline in film. A very large contingent of their investors and of wall street analysts suggested that this strategy in pursuit of future growth was plain stupid. They argued that Ek would be better off riding the film business as it declines and trying to stay profitable while doing so. They aregued that the big investments in digital were too speculative and unlikely to succeed. There was /is talk of an investor revolt related to this. So, in this case, the investors were demanding a "no growth / low investment" strategy.

[Lee Flier]

Originally posted by Kendrix:

I'll tell you that I work in a large corpoation that has had some ethical issues in the recent past. Since then we have invested big bucks on ethics training. We created a corporate ethics board chaired by a very senior executive. Weve updated all our ethics policies. The pendulum has swung way overboard IMHO.

 

So, based on personal experience i do really believe that corporations find it in their interest to maintain ethics that will be viewed favorably by the general population.

Well, they'd like to at least appear that way. That's why you see things like warm and fuzzy environmentally friendly commercials being sponsored by oil and timber companies. However, what they say and what they do are very often two different things, and too often so-called ethics training is simply training people in how to put on a good front and say the right things. Of course I don't know the details at your company, but I think that by design, corporate culture encourages unethical behavior and makes it easier to practice than ethical behavior.

 

I'm not just speaking of ethics even in terms of how one deals with money, but actions that have very real consequences on people lives, livelihoods, and health.

 

Yes- there are very visible cases that depart from this- But I beleive they are not the general rule. So, I acknowledge that corporate crinimals do exist. However, I do not think I'm "deluded" here. Ive experienced it personally. (Hell even CBS found it necessary to publically appologize cause Outkast wore some Indian garb at the grammies. Thats how sensitive things have gotten- the markets "working"!)

Again I'm not just talking about surface stuff like how somebody dresses, what terminology they use, etc. Yes, companies are VERY sensitive about that sort of stuff. Unfortunately it's just the tip of the iceberg. The stuff nobody talks about is things like the working conditions for the employees (e.g. exposure to toxins in the workplace without the employees' knowledge), the overall effect of the company on the communities where it does business ("cancer alley" in Texas, lack of accountability for environmental cleanup in industrial areas, companies picking up and moving to places where it's cheaper to do business and displacing entire local economies, etc.), entering into markets where a product would be harmful simply to maintain growth rate (e.g. Coca-Cola aggressively marketing in Third World countries), etc. I think it's safe to say that just about every public company cooks their books a la Enron to some degree, and that sucks, but it pales in comparison to some of the other common practices of corporations. And all of their positions seem defensible - they all claim that they couldn't afford to stay in business if they behaved ethically. What they really mean is that they can't maintain their entrenched culture.

 

Truly did not mean to be snide w.r.t my comment on spiriutality. I just wanted to make the point that business is not the means for addressing such items. Some folks seem to want to mix the two.

I find it really odd that you made that association in the first place based on what I said in my post. I also find it sad that people don't see the practical side of "spirituality." Sound spiritual or religious doctrines are based on very practical considerations. It's pretty simple really - what goes around comes around, actions have consequences, there's no such thing as a free lunch, do unto others, etc. All of these things apply in business as well as in our personal lives, and any spiritual doctrine worth its salt is usually just a way of passing these basic tenets on through the generations. The fact that we have tried so hard to separate the utilitarian from the spiritual in our culture speaks volumes about the kinds of values our culture is trying to pass on. We've tried really hard to divest spirituality of any teeth and make it fluffy and irrelevant (e.g. new age stuff, religious radicalism), so that we can laugh at it and pretend it has no place in our daily lives. This leaves us free to do things that we know in our hearts are wrong, and even admire and praise others who do wrong, because they're seemingly being so "pragmatic" and they are, after all, so wealthy.

 

Not many people have seriously undertaken to count the cost of this behavior to individuals or society in general, and it ain't pretty.

 

As for bonds/not stocks being the answer.

Its a fact that the cost of capital to a firm is lowest when a mix of stocks and bonds is used.

Bonds are typically secured via some collateral.

When a firm is starting out they dont have enough assets to support a large bond offering. If they went 100% bonds- beyond a certain point they would end up haveing to pay very large interest rates for them. The obligation to pay cash out in interest can literally kill a small company in high growth mode and who needs to re-invest all those dollars.

 

Here is where the strength of stocks comes into play. There is no required cash flow to the stock holders.

Yes and that's why we need a new form of trading that's more like a cross between stocks and bonds. Either there needs to be an option on the part of the company to buy back the stock at the end of a given period of time (and perhaps convert it to employee stock), or the stockholders' power to determine the direction of the company needs to be much more limited. Management of the business (and accountability for it) needs to be returned to those who actually operate the business. Corporate law and the rules of the stock market do not currently favor this.

 

Interestingly, the imperative to have to grow seems rampant. However, it is not universal. Stock holders do not alway drive this.

For example, Kodak (not my company) recently announced an aggressive strategy to invest in digital technologies to counteract the decline in film. A very large contingent of their investors and of wall street analysts suggested that this strategy in pursuit of future growth was plain stupid. They argued that Ek would be better off riding the film business as it declines and trying to stay profitable while doing so. They aregued that the big investments in digital were too speculative and unlikely to succeed. There was /is talk of an investor revolt related to this. So, in this case, the investors were demanding a "no growth / low investment" strategy.

I would say that was an exception. You have to admit the system as we know it does not encourage this - one usually has to make a very conscious effort to do the right thing as opposed to the right thing being inherently built into corporate and investment law. This creates a lot of contradiction in people's actions, even people who basically want to do the right thing. It wouldn't be THAT hard to rewrite corporate law in such a way that this wasn't the case, but the very unethical people who take advantage of the current system would never go for that, and of course they have the money and power to stop most efforts to change the system or even promote awareness of its shortcomings.