Steven Reynard

Comments:

• If you believe Taleb was writing about "Luck", you may have missed about 95% of what he was saying. Your example of flipping 10 coins and getting 8 heads in a row is a perfect example of what he was not talking about. Out of 10,000 flippers, you can closely approximate how many will achieve 8 heads in a row. In the stock market, like many other complex systems, they are far too chaotic, and many events far too rare, to even begin to calculate the odds. But even that isn't the important part. The important part are the consequences. What is the upside potential and what is the downside? Hence Taleb's stories about traders that lost more in a week than their bank made in its entire history. The point was, they had no idea what they were doing was insanely risky. Because they couldn't calculate the risk. But that risk isn't just the odds, but also the cost if you're wrong. COVID-19 is a modern example. If things work out, they may save millions of people. If they don't, they may kill millions of people. Seems like not the best place for "lowest bidder"...

  Post: Skill or Luck?

  Link to comment from May 26, 2023

• Investing in dividend-paying stocks is lunacy for two reasons. The main reason is that there are zero studies that show this stratagem can beat the market. This is the acid test of investing. A few years ago, while enjoying a free lunch, I listened to a professional money manager tout his dividend-paying stock strategy.

  Oh the irony... Michael, when a lot of people do something we don't understand, we can come to two reasonable conclusions. Either they are all crazy, which is obviously your conclusion here; or maybe there is something we are missing or fail to understand. I would suggest that perhaps the second may be a bit safer to reach and is much more likely to be correct... You seem to be under the mistaken impression that the goal of investing is to "beat the market". You are not alone. Many, many people have suffered greatly under that mistaken idea over the millennia. Then you look for evidence and demand proof that dividend investing accomplishes that goal. As one test, and I can think of many, to see if you are mistaken, consider this, why do people hold bonds? Are you going to claim that a 60/40 or 50/50 portfolio is going to "beat the market"? Are all the holders of such portfolios lunatics? Only a 100% TSM portfolio is rational? Are you sure or could you be mistaken? No, you are wrong. The acid test of investing is (are their more than one?) whether the investor's plan meets their needs. While there are people that focus solely on making the most money possible, and you could very well be one of them, that is, believe it or not, not everyone's primary or only goal. Not everyone that has the ability to become a billionaire will or desires to become one. Mostly because they are not willing to make the sacrifices required. Other goals are more important to them. Maybe hard to believe, but true, nonetheless. This is the first of your articles I've read, but it strikes me that perhaps you would be better served learning before teaching? I would recommend reading, for example, Jack Bogle, William Bernstein, Taylor Larimore, JL Collins, Johnathan Clements... OK, there are a lot of good authors out there. You may be, and probably are, correct that dividend investing is suboptimal for most people for several reasons. But your argument fails to establish that conclusion. It is always dangerous to conclude something is "always" or "never". Unless someone is omniscient, they are probably unqualified to reach that conclusion. Funny you should quote Christopher Hitchens. Perhaps you should look at his quote another way. If your extraordinary claim that investing in dividend stocks is lunacy, just maybe your conclusion requires extraordinary evidenced? Just saying... ;)

  Post: Death to Dividends

  Link to comment from January 14, 2023

• Yea, no idea why the down votes for your question??? Seems like a reasonable question to me. But the answer is yes, the long term capital gains for the couple would probably be at 15%. Of course we don't have all the details, like traditional IRA contributions, etc. to know for sure.

  Post: Death to Dividends

  Link to comment from January 14, 2023

• OK, that's probably one of the "unwisest" comments I've seen in a while... Perhaps you would care to read, "Enough" by a guy called Jack Bogle...

  Post: Death to Dividends

  Link to comment from January 14, 2023

• Thinking you are going to receive an increased share price for all those retained earnings "sounds like faith to me". How many companies that were in the S&P 500 in 1950 are still there today? What would you rather have had, the promises of management (that after all took their money and ran), or the dividends from your share of the earnings? Maybe the best choice would have been to reinvest all those earnings, but wouldn't you have wanted the choice of what to do with them? The idea that management had your best interests at heart "sounds like faith to me."

  Post: Death to Dividends

  Link to comment from January 14, 2023

• Right, the source of the dividends are rather important. A company paying money they can't afford, or worse taking out a loan to pay dividends, shows a problem. A company that retains 50% of profits to fund profit sharing, increased R&D, and maybe acquisitions; and then pays the rest in dividends is probably doing fine. Losing money, but still paying dividends is a great way to become bankrupt.

  Post: Death to Dividends

  Link to comment from January 14, 2023

• Ah, did he get the joke? I'm not sure...

  Post: Death to Dividends

  Link to comment from January 14, 2023

• And retained earnings are the company management forcing investors to accept their plan for how to invest the investors' money. "My way or the highway." If I agree with the management's plan, I can invest the dividends back with the company. If I see a better opportunity, I can invest the dividends elsewhere, or spend them, as needed. How many companies have made a good profit and then invested that profit in ways that didn't pan out? I know the company I work for did, many times. We used to joke that our management bought small companies for $400M and sold them three years later for $40M. The core business was fine. It was their extracurricular "growth" initiatives that were suspect. Watching my company stock go from $40 to $120 and then back to $12 over a decade wasn't all that fun. I think I would have preferred to collect "my share" of the profits along the way. How many companies have purchased their own stock at what turned out to be a really bad time (most?). How many have watched the price go up and then right back down, completely wiping out all those retained profits. I don't do dividend investing myself, but I can sure see the appeal. It may not be a strategy that "beats the market" (good luck discovering one of those and I sure wouldn't trust anybody that says they have found one), it sure doesn't seem insane to me. No, it may not be optimal, but it is rational.

  Post: Death to Dividends

  Link to comment from January 14, 2023