🚀 go-pugleaf

In article <slrnb4dhas.816.don@manx.misty.com>, 
don@manx.misty.com says...

<snip>

>   I said that from the 1929 high to the high around 2,000, the USA stock 
> market annual total return was 9%.  Come to think of it, I think I 
> now remember material stating that the total return of the S&P 500 
> was about 9.5% from the 1929 high to some point in the late 90's.  
> Includes the Great Depression and WWII.

Pick *any* 30 year average (the time period of most investors) in 
the past century and you'll find the same.  *THAT's* the point.  

<snip>

> >Stocks are overly focussed on quarterly returns, so do _not_ maximise
> >profit reinvestment.
> 
>   If companies planned more for the long term than for looking good in the 
> next quarter, then our economy and the stock market would do even better 
> than they actually do.

Certainly.  That's why ending the double-taxation on capital 
returns is so critical.  It will *force* the corporations to 
return the capital to the investors rather than squandering it on 
trying to increase "value". 

From what I've been reading there are two easy ways of doing 
this.  The Bush proposal to eliminate taxes on dividends looks 
good, but may be too indirect.  The other obvious solution is to 
allow corporations to expense dividends and then tax the 
individual.  Either way, the result is management being more 
beholding to the owners of the corporation.
 
> >With the coming tax changes favoring dividend payouts, that will be even 
> >worse.
> 
>   As I remember it, historical P/E ratio of the S&P 500 was 15 (reciprocal 
> is 6.7%) and dividend payout was historically a good 3% - 2% was until the 
> '90's bull market and last decade's cuts in capital gains taxes a sign of 
> stocks being overbought.  3% out of 6.7% meant companies paying about 45% 
> of their profits out as dividends and they sure haven't done close to that 
> the last several years.

Certainly not.  There is no incentive for corporations to pay 
dividends.  The stockholders want to se a rise in the stock 
prices.  They do *not* want to pay taxes on dividends on money 
they won't touch for decades.  The situation with mutual funds is 
particularly bad.

> I will worry if dvidend payouts get really far 
> above that 45% figure.  One thing we had more of since cuts in the capital 
> gains tax was companies buying back their own shares as an alternative to 
> paying dividends because of tax advantages (to shareholders) of spending 
> money to cause capital gains rather than paying dividends.  Share buyback 
> is not reinvestment into additional profitable corporate assets any more 
> than dividend payout is.

Bingo!  Share buy backs are also a way of creating a slush-fund 
for management to hide problems (at least in the short term).

>   And if the companies give you some of their money, then you reinvest it 
> as you see fit, including buying more shares of the companies.  This 
> happens automatically for you in an index fund.  Or buy shares of 
> companies that run their businesses in a manner you approve of.

No question.  This is why I'm 100% in favor of dropping the 
double taxation on dividends, one way or the other.  Let the 
argument on which way is better begin!

-- 
  Keith