Posted on: 02 July, 2004
Author: William Cate
Stock is MoneyBy William CatePublished May 1998[http://home.earthlink.net/~beowulfinvestments/] [http://home.earthlink.net/~beowulfinvestments/globalvillageinvestmentclubwelcome/] Every public company... Stock is MoneyBy William CatePublished May 1998[http://home.earthlink.net/~beowulfinvestments/] [http://home.earthlink.net/~beowulfinvestments/globalvillageinvestmentclubwelcome/] Every public company has a permit to print money. We call theirmoney "stock." The public company's job is to convince investors that theirstock 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 papermoney is the ability of the Government to expand its supply. When aGovernment inflates its currency, it risks economic upheaval. Nationalfinancial instability leads to political unrest. President Suharto ofIndonesia is an example of the risks politicians run with inflation.Public companies run the same inflation risk. One reason theCanadian Stock Markets lack credibility is that they allow the listedcompany insiders to inflate the issued stock and dump it. I disagree withthe SEC decision to reduce the holding period for insider stock to oneyear. The inflated shares hit the market like a tidal wave. When the U. S.Government inflates the currency, it takes about eighteen months for theAmerican people to see higher prices. When a public company issues morestock, it often takes a few days for the stock to depress the company'sshare price. At best, it takes a year for the company's shareholders to paythe price for the stock inflation.One way the American Government has offset its tendency to inflatethe 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 fromIndia to Russia. People are storing dollars as a hedge against localeconomic instability. What these dollar hoarders fail to realize is thatthe American Government may not redeem those dollars in the future.In the same way, foreign investors want to buy stock in Americancompanies. It's the reason that it's easier to list an American OTCBBcompany in Europe than a domestic company. It's easier to attract investorsto an American stock than to a domestic stock. The ethical issue is thesame 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 theirshares to dollars. If you wisely invested the shareholders' money thebalance sheet worth of your company will be greater. If you maintain asound IR program, your share price will be stronger. If you seek to sellyour company to an industry giant, in a friendly acquisition at marketcapitalization, your shareholders will gain the greatest benefit from theirinvestment. You will make more money.Your approach is simple. Investors buy your stock today and fundyour company, into the future. In time, your shareholders sell their stockin your company and convert their profits into dollars. If you implementthis policy, you'll avoid problems with regulators. Your company willprosper. 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/] Article Tags: Public Company, Share Price Source: Free Articles from ArticlesFactory.com