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Dick's Sporting Goods Inc. Message Board

  • alex11235919 alex11235919 Jan 21, 2004 8:42 PM Flag

    The Purpose of the stock market

    Note: I posted this on the SSRI board, so I talk about SSRI and silver in it, but you can relate it to whatever stock...

    I figured it was worth reposting here too
    ***********

    Ok, regarding the discussion of SSRI issuing shares...


    What is the purpose of the Stock Market?

    No, it is not to may you, me, or anyone else rich. We do not have some sort of 'right' to an endless bull market.

    The purpose of the stock market is for companies to raise capital, and more generally, its purpose is to facilitate the efficient distribution of capital to worthy ideas.

    When an entrepreneuer has an idea which they think will be successful, bringing profits and helping the economy, or when a company seeks to raise money to expand or improve its operations, they can issue shares of stock in their company to raise funds.

    Those ideas that are the most worthy will theoretically be allocated the most money by investors, though of course this wont always happen. If investors beleive a company is worthy of investment of new capital, they will buy its shares, bidding up its share price, and allowing the company to gather more capital, and they will buy its new issued shares.

    If a company is efficient, its share price will increase, attracting more capital to that efficient part of the eocnomy/ efficient company.
    If a company is inefficient, losing money, its share price will decline, decreasing the amount of capital that they can raise, and thus the amount of capital that can be spent there.

    Thus, the stock market will (usually) allocate capital in an efficient way. Projects which will be of large benefit, in relation to their costs, will be given funding in preference of less worthwhile projects. This helps the economy to run smoothly.


    Sometimes this breaks down. Investors enter some craze, and cease to allocate capital efficiently to worthwhile companies, instead funding (for example), worthless internet comapnies with hundreds of millions of dollars, and ultimately no benefit to anyone. This causes worthy projects to be ignored, and the economy suffers as a result, in the long run. Thus, each mania leads to a bust, while the economy recovers from this misallocation of capital.

    Investors who allocate their capital into efficient companies are rewarded with gains. Those who fund less worthy projects will see smaller gains, or losses. Obviously, this approach takes a longer term veiw of things, as the day to day prices of stocks will vary wildly, but in the end, will be related to the earnings generated by the company.

    Thus, investors are rewarded for investing in worthy projects, and the economy runs more efficiently. Thus, investing in this manner is mutually beneficial to both the investor and the company (and to the economy as well).
    .....continued

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    • TSA has already gone through that process. DKS has not. ANY retail company can declare bankruptcy --- it just depends on where one gets on (or off) the freight train. Hitting the cycle is extremely important. The only reliable way I know how to do it is to leave some on the table for the mighty mo' momentum idiots (i.e. IBD followers), and exit early. of course if one has enoguh shares one can do this over a period of time......Good luck to all....

    • "You obviously don't know retail, and more importantly a momentum play that signs leases en masse." Message 4959

      "Have you EVER seen a firm declare bankruptcy as a formal process to close stores (i.e. break leases)? Sometimes a formal process needs to be done, since the leases take just too much time to be re-negotiated. If this is news to you, keep investing mindlessly. When DKS goes through its ultimate restructuring for all the stores they are opening, and this becomes an issue, you'll learn this valuable lesson quite quickly I assure you." Message 4956

      Looking at press releases from the 3Q for both companies it looks like DKS had 11 new stores and TSA had 9. Also, TSA has announced plans to remodel 100+ locations which could potentially require new leases. Based on your comments above about DKS, doesn't this bother you, or do facts that work against TSA don't matter? Maybe the new TSA/Garts will declare bankruptcy and take the easy way out concerning their leases.

      Jake

    • add SONS to that list of recent pick ups.

    • I do know factual data Val. You are an ass. How's that for starters?

      Again, you sit here and chastise my stock purchases...well for the record Val, EVERY TIME I purchase or sell something I let folks know when it happens...I don;t pull your crap, days after TSA takes a dive, and then picks back up, you have suddenly bought more shares after the fact...Be real Val.

      My last 4 stock purchases.

      DKS $34.02
      DBBD .06
      OPLO .195
      CKR average $6.13

      Look em up, let me know what's what...

      Oh yeah and some of your latest purchases...

      DKS short $46
      PHM short (split adjusted $43)

      You suck.


      The only thing hitting me on the head are dollars.

    • exactly matrix...he was offered, he wussed out, now he sits on the sidelines and takes pop shots at those of us that actually enjoy a little comraderie (sp?)

    • Yeah we obviously don't know retail...DKS sucks, TSA is the best. Give us some sort of facts, opinions, that support your claims. Not just your typical we are dumb, you know everything BS.

      You can't, you never have you never will. Yet you have the balls to say we know nothing. Stick it Val, you are an egotistical piece of crap, that doesn;t deserve the iar you breath.

    • non...he would rather have people kick him in the dirt than have nobody to talk to at all...

      He is short DKS and is sore at those of us making money in spite of him.

    • damn...a guy can't even sneak out on a nice Friday afternoon and play a round of golf without Val somehow managing to start an uprising!

      Sorry Val, wrong again, you have found a new buddy, it's not me.

      So my idiotic comment would be, there are more people in this world that think you are a prick than just me...

    • Your profile section is hillarious! Maxi-pad would have a field day with it. Take my advice, go on listening to complete idiots like max, dicksmatrix, et al. Do me a favor, whatever you feel they have taught you, or whatever hot name they have given you --- please double down (or for one of their rare picks, double up). Things will end that much quicker for you......Good luck to all.....

      BTW max would not know "factual data" (I would have used the word FUNDAMENTAL) if it hit him on the head......Now that's a F-A-C-T!

    • As Max has written over and over all the mighty val would have had to do to make believers of us all was to have entered the DKS fund and using the secret valuation formula display his investing prowess.

      val is the most transparent personality I have ever had the misfortune of crossing paths with.

    • View More Messages
 
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