Stock Is Money
Stock is Money
By William Cate
Published May 1998
[http://home.earthlink.net/~beowulfinvestments/] [http://home.earthlink.net/~beowulfinvestments/globalvillageinvestmentclubwelcome/]
Every public company has a permit to print money. We call their
money "stock." The public company's job is to convince investors that their
stock is worth more than the investor's money. When you succeed, your share price is strong. When you fail, your share price collapses. Eventually,
your company will fail.
Stock, like money, suffers from inflation. The objection to paper
money is the ability of the Government to expand its supply. When a
Government inflates its currency, it risks economic upheaval. National
financial instability leads to political unrest. President Suharto of
Indonesia is an example of the risks politicians run with inflation.
Public companies run the same inflation risk. One reason the
Canadian Stock Markets lack credibility is that they allow the listed
company insiders to inflate the issued stock and dump it. I disagree with
the SEC decision to reduce the holding period for insider stock to one
year. The inflated shares hit the market like a tidal wave. When the U. S.
Government inflates the currency, it takes about eighteen months for the
American people to see higher prices. When a public company issues more
stock, it often takes a few days for the stock to depress the company's
share price. At best, it takes a year for the company's shareholders to pay
the price for the stock inflation.
One way the American Government has offset its tendency to inflate
the dollar is to convince non-Americans of the stability of the U. S.
dollar. You can find U. S. Hundred-dollar bills hidden in mattresses from
India to Russia. People are storing dollars as a hedge against local
economic instability. What these dollar hoarders fail to realize is that
the American Government may not redeem those dollars in the future.
In the same way, foreign investors want to buy stock in American
companies. It's the reason that it's easier to list an American OTCBB
company in Europe than a domestic company. It's easier to attract investors
to an American stock than to a domestic stock. The ethical issue is the
same for the U. S. Government and the public company. Should foreign small capital investors have the right to redeem their American shares? I believe the answer should be yes. My viewpoint isn't shared by over 80% of the OTCBB companies.
Stock is money. At some point, shareholders must convert their
shares to dollars. If you wisely invested the shareholders' money the
balance sheet worth of your company will be greater. If you maintain a
sound IR program, your share price will be stronger. If you seek to sell
your company to an industry giant, in a friendly acquisition at market
capitalization, your shareholders will gain the greatest benefit from their
investment. You will make more money.
Your approach is simple. Investors buy your stock today and fund
your company, into the future. In time, your shareholders sell their stock
in your company and convert their profits into dollars. If you implement
this policy, you'll avoid problems with regulators. Your company will
prosper. You'll grow rich.
To contact the author: Visit the Beowulf Investments website: [http://home.earthlink.net/~beowulfinvestments/] Or, visit the Global Village Investment Club Website:
[http://home.earthlink.net/~beowulfinvestments/globalvillageinvestmentclubwelcome/]
About the Author
He has been the Managing Director of Beowulf Investments [http://home.earthlink.net/~beowulfinvestments/] since 1981 and is the Executive Director of the Global Village Investment Club [http://home.earthlink.net/~beowulfinvestments/globalvillageinvestmentclubwelcome/]
- The “Lucky 500” is Not a Stock Car Race!
The “Lucky 500” is Not a Stock Car Race!... - A gadfly on a dinosaur’s butt, or the hood-winking of the American stock investor.
Have you ever noticed how some words in the English language are so perfectly named for what they describe? And how some words seem to be, I guess you could say, backwards? For instance, the word sunflower! How wonderfully aptly named is the... - How To Identify Explosive Stocks To Trade
Many traders often come to me with this question, " How can I know what stocks are going to break out in price?"...
14 Users Online