Theoretically, shareholders might be interested in profits, but given the rapid turnover of stocks, you might be forgiven for thinking that shareholders are interested in stock prices. I may think that Fannie Mae is going to go bankrupt next month, but I have inside information that Paulson will give a talk today to reassure stockholders. Given that knowledge, wouldn't it be good to buy stock today and sell it tomorrow for a quick profit, even if the company is going to tank.
Besides, I'm not sure how informative reported profits are. Even successful companies smooth their profits to avoid overreactions in the market to divergence from expectations. I don't need to mention the manipulation of profits intended to defraud investors à la Enron. I don't know how much stock is bought and sold on the basis of charting, but I assume it is substantial. Such investors pay little or no attention to profits. Michael Perelman Economics Department California State University michael at ecst.csuchico.edu Chico, CA 95929 530-898-5321 fax 530-898-5901 michaelperelman.wordpress.com -----Original Message----- From: [EMAIL PROTECTED] [mailto:[EMAIL PROTECTED] On Behalf Of Laurent GUERBY Sent: Monday, September 01, 2008 10:08 AM To: Progressive Economics Subject: RE: [Pen-l] Stock Buybacks Again On Mon, 2008-09-01 at 08:46 -0700, Perelman, Michael wrote: > Dividends and stock buybacks differ in another respect. Investors use > changes in dividends as a signal of how well companies are doing. > Companies sometimes hide problems by maintaining dividends even when > they might not be doing that well. What is interesting for shareholders is profit. Then allocating profits between reinvestment in the business, acquisition, dividends and share buybacks is a political decision of the company management and voted upon by shareholders. As I said in my first post, we have more easily access to informations on dividends rather than share buybacks (check finance sites, you'll get dividends and profits, but not easily share buybacks information even if it's formally public). Laurent _______________________________________________ pen-l mailing list [email protected] https://lists.csuchico.edu/mailman/listinfo/pen-l _______________________________________________ pen-l mailing list [email protected] https://lists.csuchico.edu/mailman/listinfo/pen-l
