Was whole economy a Ponzi scheme?

Re:Was whole economy a Ponzi scheme? by nostrademons on Friday January 02, 2009 @12:51AM (#417099)

If you're arguing that most companies are not generating anywhere near the cash flows needed to justify their valuations, you'll find no argument from me. Even after falling 45%, S&P500 P/Es are still around 12, which implies an earnings yield of around 8% assuming earnings stayed constant. Given the historically record earnings of recent years, that seems to be on the high side of reasonable.

But if there were a company that traded at a P/E of 7-10, had no red flags like excessive debt or discrepancies between cash flow and earnings, yet paid no dividends, I'd have no qualms about investing. That actually describes Berkshire Hathaway pretty well, if its stock price were to drop a bit.

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Re:Was whole economy a Ponzi scheme? by netcan on Friday January 02, 2009 @05:34AM (#417254)

Sure, but I'm arguing a bit more then that.

I'm arguing that it's fine to have some companies that don't pay dividends. Fine in a world where the standard is dividend paying companies. Once they become the exception, once you stop even speculating about what they would be paying if they where paying, once you start talking about, game's up. Stock becomes trading cards.

BTW, it's not just not paying. Paying 1-3% is the same sort of issue just that then it's the investors rather then the companies fault.

But then, all that says. It still works. Sort of. Baffles me.

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