Investment & Financial Articles
Title: Stock Is Money
Author: William Cate
Article:
Stock is Money By William Cate Published May 1998
[http://home.earthlink.net/~beowulfinvestments/]
[http://home.earthlink.net/~beowulfinvestments/globalvillageinves
tmentclubwelcome/]
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/globalvillageinves
tmentclubwelcome/]
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/globalvillageinves
tmentclubwelcome/]
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