Peter Schiff Promotes Dividends to Protect Against Speculative Market Valuations

Discuss all general (i.e. non-personal) investing questions and issues, investing news, and theory.
Locked
Topic Author
redhawkwatch
Posts: 12
Joined: Mon Apr 24, 2017 11:48 am

Peter Schiff Promotes Dividends to Protect Against Speculative Market Valuations

Post by redhawkwatch » Tue Feb 27, 2018 7:53 pm

I have been reading one of Mr. Schiff's books from 2008. He states that higher dividend paying stocks are better than capital appreciations stocks, because they give value besides the capital appreciation, which can be pushed high simply depending on consumer sentiment, rather than actual earnings.

Any thoughts? Seemed like an interesting idea. Don't worry, I'm not all in with Schiff, I just appreciate another perspective. And, of course, I would only use Vanguard Index funds if I were interested in this (Admiral shares).

AlohaJoe
Posts: 5076
Joined: Mon Nov 26, 2007 2:00 pm
Location: Saigon, Vietnam

Re: Peter Schiff Promotes Dividends to Protect Against Speculative Market Valuations

Post by AlohaJoe » Tue Feb 27, 2018 8:02 pm

redhawkwatch wrote:
Tue Feb 27, 2018 7:53 pm
I have been reading one of Mr. Schiff's books from 2008. He states that higher dividend paying stocks are better than capital appreciations stocks, because they give value besides the capital appreciation, which can be pushed high simply depending on consumer sentiment, rather than actual earnings.

Any thoughts?
Which of the things you've read from him over the past 10 years has turned out to be correct?

https://www.cnbc.com/2015/12/20/the-pet ... tions.html

Jiu Jitsu Fighter
Posts: 180
Joined: Mon Nov 21, 2016 10:22 am

Re: Peter Schiff Promotes Dividends to Protect Against Speculative Market Valuations

Post by Jiu Jitsu Fighter » Tue Feb 27, 2018 8:10 pm

Peter Schiff has a good understanding of macroeconomics. However, his knowledge regarding investing and capital markets is horrific. He had his clients in foreign stocks, gold mining stocks, and oil stocks for the past ten years. So basically he runs a broker-dealer that would have had you in some of the worst performing investments for a decade. He did call the housing bubble but has been calling for hyperinflation since then. His crystal ball may be made of gold, but it still can't predict the future.

User avatar
arcticpineapplecorp.
Posts: 4637
Joined: Tue Mar 06, 2012 9:22 pm

Re: Peter Schiff Promotes Dividends to Protect Against Speculative Market Valuations

Post by arcticpineapplecorp. » Tue Feb 27, 2018 8:59 pm

welcome to the forum. I bet you haven't read Larry Swedroe's posts/articles about why stocks that pay dividends are not preferable. It's total return that matters and whether a dividend (which is a part of earnings) is paid out to investors or reinvested by the business makes no difference in the end result. Think about it. If two companies both earn 8% a year but the first company pays no dividend and the second company pays a 4% dividend, then the first company's stock price appreciates at 8% while the second company's stock price appreciates at 4% (because you got the other 4% as a dividend). That's how dividends and stock prices work. When a dividend is paid the stock price drops in the amount of the dividend that was paid. So the first stock is appreciating at 8% a year and the second at 4% a year + the 4% in dividends you received. See how your total return is the same either way?

Here Larry talks about investors "odd affection for dividends":
http://www.etf.com/sections/index-inves ... nopaging=1
In their 1961 paper, “Dividend Policy, Growth, and the Valuation of Shares,” (https://www.jstor.org/stable/2351143?se ... b_contents) Merton Miller and Franco Modigliani famously established that dividend policy should be irrelevant to stock returns.
source: http://www.etf.com/sections/index-inves ... nopaging=1
Here he says dividends are an "illogical preference":
http://www.etf.com/sections/index-inves ... nopaging=1

Here's a boglehead post referencing a Swedroe article where Larry "slaughter's the high dividend sacred cow":
viewtopic.php?t=231661
actual article by Swedroe:
https://www.advisorperspectives.com/art ... sacred-cow

Here's a lively debate at bogleheads about Larry's article on the "dividend myth":
viewtopic.php?t=227902

In his post, he writes that Vanguard debunked the dividend myth:
Both theory and historical evidence demonstrate there isn’t anything unique about dividends. They are just another source of profit, along with capital gains. Yet many investors treat these two sources of profit very differently, with negative consequences in terms of lower returns, greater risks and less diversified portfolios.
source: http://www.etf.com/sections/index-inves ... nopaging=1
But Larry says (tongue in cheek):
Vanguard’s conclusion that a total-return approach is superior to one that focuses on dividend strategies is interesting in light of the fact that they offer dividend strategy funds: the Vanguard Dividend Appreciation ETF (VIG) and its mutual fund counterpart, the Vanguard Dividend Appreciation Index Fund (VDADX), as well as the actively managed Vanguard Dividend Growth Fund (VDIGX).
source: http://www.etf.com/sections/index-inves ... nopaging=1
What do you think now that you have been given contrary information to what Mr. Schiff promotes?

Oh, and as for the notion that dividend stocks provide "Value" in addition to capital appreciation, Larry has written that dividend paying stocks are poor substitutes for value companies. If you really want value companies, own a value index fund, not a high yield dividend stock fund.
"May you live as long as you want and never want as long as you live" -- Irish Blessing | "Invest we must" -- Jack Bogle

JBTX
Posts: 5752
Joined: Wed Jul 26, 2017 12:46 pm

Re: Peter Schiff Promotes Dividends to Protect Against Speculative Market Valuations

Post by JBTX » Tue Feb 27, 2018 9:37 pm

arcticpineapplecorp. wrote:
Tue Feb 27, 2018 8:59 pm
welcome to the forum. I bet you haven't read Larry Swedroe's posts/articles about why stocks that pay dividends are not preferable. It's total return that matters and whether a dividend (which is a part of earnings) is paid out to investors or reinvested by the business makes no difference in the end result. Think about it. If two companies both earn 8% a year but the first company pays no dividend and the second company pays a 4% dividend, then the first company's stock price appreciates at 8% while the second company's stock price appreciates at 4% (because you got the other 4% as a dividend). That's how dividends and stock prices work. When a dividend is paid the stock price drops in the amount of the dividend that was paid. So the first stock is appreciating at 8% a year and the second at 4% a year + the 4% in dividends you received. See how your total return is the same either way?

Here Larry talks about investors "odd affection for dividends":
http://www.etf.com/sections/index-inves ... nopaging=1
In their 1961 paper, “Dividend Policy, Growth, and the Valuation of Shares,” (https://www.jstor.org/stable/2351143?se ... b_contents) Merton Miller and Franco Modigliani famously established that dividend policy should be irrelevant to stock returns.
source: http://www.etf.com/sections/index-inves ... nopaging=1
Here he says dividends are an "illogical preference":
http://www.etf.com/sections/index-inves ... nopaging=1

Here's a boglehead post referencing a Swedroe article where Larry "slaughter's the high dividend sacred cow":
viewtopic.php?t=231661
actual article by Swedroe:
https://www.advisorperspectives.com/art ... sacred-cow

Here's a lively debate at bogleheads about Larry's article on the "dividend myth":
viewtopic.php?t=227902

In his post, he writes that Vanguard debunked the dividend myth:
Both theory and historical evidence demonstrate there isn’t anything unique about dividends. They are just another source of profit, along with capital gains. Yet many investors treat these two sources of profit very differently, with negative consequences in terms of lower returns, greater risks and less diversified portfolios.
source: http://www.etf.com/sections/index-inves ... nopaging=1
But Larry says (tongue in cheek):
Vanguard’s conclusion that a total-return approach is superior to one that focuses on dividend strategies is interesting in light of the fact that they offer dividend strategy funds: the Vanguard Dividend Appreciation ETF (VIG) and its mutual fund counterpart, the Vanguard Dividend Appreciation Index Fund (VDADX), as well as the actively managed Vanguard Dividend Growth Fund (VDIGX).
source: http://www.etf.com/sections/index-inves ... nopaging=1
What do you think now that you have been given contrary information to what Mr. Schiff promotes?

Oh, and as for the notion that dividend stocks provide "Value" in addition to capital appreciation, Larry has written that dividend paying stocks are poor substitutes for value companies. If you really want value companies, own a value index fund, not a high yield dividend stock fund.
I agree that whether a company pays dividends or not as part of the return in theory makes no difference In one the company reinvests the money, the other you get a dividend, and buy more shares of the company. The net result is the same. In the past dividends were taxed more, so it was a negative, but in early 2000's tax legislation they were equalized.

One qualitative point in favor of dividend paying companies, is that it could, arguably, change the way management behaves. The argument goes that if management knows they have to pay a dividend, they are less likely to squander the money on marginal or risky projects. It is an interesting theory, but I have no idea if there is any data to back that up.

As to Vanguard Dividend appreciation ETF, and Vanguard dividend growth, I have both. They pay lower dividends, but have a long history of increasing dividends. The net result is that those companies tend to be better and more stable companies, or "quality" companies. These are quite different than high dividend yield companies that could very well be low valued because they are poorly run or in distress. So these two funds are not an effort to make return on dividend yield, but to invest in companies that are steady enough to be able to continually increase dividends over the long run. Looking at these funds over the long term they trail the S&P 500 a bit, but they did hold up better in 2000 and 2008. Their fees are also very low. And these also lean more to the growth side vs the value side.

User avatar
arcticpineapplecorp.
Posts: 4637
Joined: Tue Mar 06, 2012 9:22 pm

Re: Peter Schiff Promotes Dividends to Protect Against Speculative Market Valuations

Post by arcticpineapplecorp. » Tue Feb 27, 2018 10:01 pm

JBTX wrote:
Tue Feb 27, 2018 9:37 pm
One qualitative point in favor of dividend paying companies, is that it could, arguably, change the way management behaves. The argument goes that if management knows they have to pay a dividend, they are less likely to squander the money on marginal or risky projects. It is an interesting theory, but I have no idea if there is any data to back that up.
I think that is the belief (that dividends keep management disciplined/honest/conservative so they can pay the dividend)...but plenty of companies can/do cut dividends if they run into trouble. So a dividend in and of itself does nothing to keep management honest. But people want to believe so.

Also, I think it's a chicken and egg thing. Do shareholders demand dividends because they want to keep management honest or do they demand the dividend because they have been given reason to mistrust management?

Case in point: Berkshire Hathaway doesn't pay a dividend. (Alright it paid one once or twice and Warren said he must have been in the bathroom when the board agreed to pay the dividend). Do shareholders demand berkshire pay a dividend? No. Why? Because they know that Warren/Charlie et. al. are more likely to create value by reinvesting profits than paying them out as a dividend. Now if Warren and Charlie et. al. broke that trust with the shareholders (made bad acquisitions, destroyed shareholder value, etc.) then wouldn't shareholders demand a return of some profits in the form of dividends? Probably.

If that's the case, that you don't trust management to make sound decisions and you'd rather have part of the profits as a dividend...doesn't it beg the question why you'd want to invest in a company who's management you don't fully trust?
"May you live as long as you want and never want as long as you live" -- Irish Blessing | "Invest we must" -- Jack Bogle

JBTX
Posts: 5752
Joined: Wed Jul 26, 2017 12:46 pm

Re: Peter Schiff Promotes Dividends to Protect Against Speculative Market Valuations

Post by JBTX » Tue Feb 27, 2018 10:20 pm

arcticpineapplecorp. wrote:
Tue Feb 27, 2018 10:01 pm
JBTX wrote:
Tue Feb 27, 2018 9:37 pm
One qualitative point in favor of dividend paying companies, is that it could, arguably, change the way management behaves. The argument goes that if management knows they have to pay a dividend, they are less likely to squander the money on marginal or risky projects. It is an interesting theory, but I have no idea if there is any data to back that up.
I think that is the belief (that dividends keep management disciplined/honest/conservative so they can pay the dividend)...but plenty of companies can/do cut dividends if they run into trouble. So a dividend in and of itself does nothing to keep management honest. But people want to believe so.
I'm not totally advocating the theory, just repeating it. I do think in some cases it has merit, but it is selective, and of course it isn't true across the board.
Also, I think it's a chicken and egg thing. Do shareholders demand dividends because they want to keep management honest or do they demand the dividend because they have been given reason to mistrust management?

Case in point: Berkshire Hathaway doesn't pay a dividend. (Alright it paid one once or twice and Warren said he must have been in the bathroom when the board agreed to pay the dividend). Do shareholders demand berkshire pay a dividend? No. Why? Because they know that Warren/Charlie et. al. are more likely to create value by reinvesting profits than paying them out as a dividend. Now if Warren and Charlie et. al. broke that trust with the shareholders (made bad acquisitions, destroyed shareholder value, etc.) then wouldn't shareholders demand a return of some profits in the form of dividends? Probably.

If that's the case, that you don't trust management to make sound decisions and you'd rather have part of the profits as a dividend...doesn't it beg the question why you'd want to invest in a company who's management you don't fully trust?
Valid question.

lazyday
Posts: 3752
Joined: Wed Mar 14, 2007 10:27 pm

Re: Peter Schiff Promotes Dividends to Protect Against Speculative Market Valuations

Post by lazyday » Wed Feb 28, 2018 3:38 am

JBTX wrote:
Tue Feb 27, 2018 9:37 pm
The argument goes that if management knows they have to pay a dividend, they are less likely to squander the money on marginal or risky projects. It is an interesting theory, but I have no idea if there is any data to back that up.
I like the term "Empire Building". Buying other companies or expanding internally even when it destroys shareholder value. The CEO's compensation and prestige can increase when the company becomes larger. Dividends might be a check on this conflict of interest.

Here's one paper:

Surprise! Higher Dividends = Higher Earnings Growth
Robert D. Arnott and Clifford S. Asness
2003
The historical evidence strongly suggests that expected future
earnings growth is fastest when current payout ratios are high and slowest
when payout ratios are low. This relationship is not subsumed by other
factors, such as simple mean reversion in earnings. Our evidence thus
contradicts the views of many who believe that substantial reinvestment of
retained earnings will fuel faster future earnings growth. Rather, it is
consistent with anecdotal tales about managers signaling their earnings
expectations through dividends or engaging, at times, in inefficient empire
building. Our findings offer a challenge to market observers who see the
low dividend payouts of recent times as a sign of strong future earnings to
come.
https://www.researchaffiliates.com/docu ... Growth.pdf

Arnott might still believe this. Articles on the Research Affiliates site still mention the paper. As I recall, a methodology paper for determining expected returns from equities uses it as part of an explanation for low expected growth.

However, as I recall, last year's expected return paper from AQR (Asness is co founder) added a new methodology to account for buybacks, increasing the predicted returns with increased net buybacks. Research Affiliates might say that AQR has the sign wrong. There might be a footnote in the AQR paper linking another paper to justify expecting increased growth with higher net buybacks.

User avatar
snodog
Posts: 267
Joined: Fri Dec 21, 2007 5:33 pm
Location: Pennsylvania

Re: Peter Schiff Promotes Dividends to Protect Against Speculative Market Valuations

Post by snodog » Wed Feb 28, 2018 4:04 pm

Jiu Jitsu Fighter wrote:
Tue Feb 27, 2018 8:10 pm
Peter Schiff has a good understanding of macroeconomics.
Yeah gotta love those austrian economics.

User avatar
Alexa9
Posts: 1872
Joined: Tue Aug 30, 2016 9:41 am

Re: Peter Schiff Promotes Dividends to Protect Against Speculative Market Valuations

Post by Alexa9 » Wed Feb 28, 2018 4:15 pm

Dividend stocks are shown to outperform but I believe it's because they are skewed towards the value side. Whether a company gives a dividend or not makes no difference in theory. It's the total return. They are better off reinvesting in their company than paying shareholders.

User avatar
Top99%
Posts: 390
Joined: Sat Apr 22, 2017 9:30 am
Location: Austin, TX

Re: Peter Schiff Promotes Dividends to Protect Against Speculative Market Valuations

Post by Top99% » Thu Mar 01, 2018 9:19 am

I think right now the pursuit of dividends has lead to speculative market valuations in many traditional dividend centric assets (utilities, REITs, etc.). That doesn't feel like protection to me.
Adapt or perish

3funder
Posts: 1177
Joined: Sun Oct 15, 2017 9:35 pm

Re: Peter Schiff Promotes Dividends to Protect Against Speculative Market Valuations

Post by 3funder » Thu Mar 01, 2018 4:10 pm

Here's the flip side of the coin: One could argue that some companies, particularly those that issue juicier dividends than their industry-alike peers, do so because they aren't confident that they have a solid plan to allocate their capital in a way that will lead to meaningful top-line growth.

Jiu Jitsu Fighter
Posts: 180
Joined: Mon Nov 21, 2016 10:22 am

Re: Peter Schiff Promotes Dividends to Protect Against Speculative Market Valuations

Post by Jiu Jitsu Fighter » Thu Mar 01, 2018 5:14 pm

snodog wrote:
Wed Feb 28, 2018 4:04 pm
Jiu Jitsu Fighter wrote:
Tue Feb 27, 2018 8:10 pm
Peter Schiff has a good understanding of macroeconomics.
Yeah gotta love those austrian economics.
What is your issue with the oldest school of economic thought? I didn't hear any keynesian/neoclassical economists pounding the table about a looming housing bubble in 2006. They still think the Phillips curve is legit. The 70s, the 90s, and the 2010s have debunked the relationship of inflation and employment, but the Fed still sticks with it. If I hear the phrases, "aggregate demand", "injecting capital", or "our economy is based on consumption", I'm going to puke. No mention in MSM about savings and production and human action.

david1082b
Posts: 371
Joined: Fri Jun 09, 2017 12:35 pm

Re: Peter Schiff Promotes Dividends to Protect Against Speculative Market Valuations

Post by david1082b » Thu Mar 01, 2018 6:08 pm

Jiu Jitsu Fighter wrote:
Thu Mar 01, 2018 5:14 pm
I didn't hear any keynesian/neoclassical economists pounding the table about a looming housing bubble in 2006.
Paul Krugman did articles in 2005 talking about the housing bubble:
some people still deny that there's a housing bubble. Let me explain how we know that they're wrong. http://www.nytimes.com/2005/08/08/opini ... sound.html
I don't know why you'd expect to "hear" economists "pounding the table" about issues - you need to read a lot of their stuff before you can know what they have said.
They still think the Phillips curve is legit. The 70s, the 90s, and the 2010s have debunked the relationship of inflation and employment,
I found a blog post from Krugman from 2012 with a nuanced take on the Phillips curve:
I often hear people saying that the experience of the 70s refuted the whole notion of a Phillips curve. No, it didn’t. What it did was show that unemployment wasn’t the only determinant of current inflation; expected future inflation is also crucial.

And what the Phillips curve with expected inflation implied was “clockwise spirals” in unemployment-inflation space. Suppose you came into a recession with, say, 10 percent inflation. This inflation rate would fall in the face of high unemployment — and expected inflation would eventually fall too, so that when unemployment fell again inflation would remain lower than it was pre-recession (until the next boom).

Both the slump of the mid-1970s and the slump of the early 80s fitted this pattern, but the recent slump has not: [chart]

So why the difference? Some people have pointed to the failure of inflation to fall by a lot as evidence that the NAIRU — the non-accelerating-inflation rate of unemployment — has risen sharply, so that America is now at more or less full employment.

I’m in the camp that says that the expectations-augmented Phillips curve breaks down at low inflation rates, thanks to nominal wage rigidity https://krugman.blogs.nytimes.com/2012/ ... inflation/
A post from 2014 about the post-2008 situation:
In a previous post I mentioned, sort of in passing, that recent data actually look like an old-fashioned pre-accelerationist Phillips curve — that is, unemployment determines the inflation rate, not the rate of change of the inflation rate. https://krugman.blogs.nytimes.com/2014/ ... e-wonkish/

GratefulinNC
Posts: 68
Joined: Sat Jan 20, 2018 2:33 pm

Re: Peter Schiff Promotes Dividends to Protect Against Speculative Market Valuations

Post by GratefulinNC » Thu Mar 01, 2018 9:36 pm

snodog wrote:
Wed Feb 28, 2018 4:04 pm
Jiu Jitsu Fighter wrote:
Tue Feb 27, 2018 8:10 pm
Peter Schiff has a good understanding of macroeconomics.
Yeah gotta love those austrian economics.
What's wrong with the Austrian school of Economics? I read the Road to Serfdom -- made sense to me.

User avatar
nisiprius
Advisory Board
Posts: 39758
Joined: Thu Jul 26, 2007 9:33 am
Location: The terrestrial, globular, planetary hunk of matter, flattened at the poles, is my abode.--O. Henry

Re: Peter Schiff Promotes Dividends to Protect Against Speculative Market Valuations

Post by nisiprius » Fri Mar 02, 2018 6:44 am

Redhawk watch, there are two parts of your remark to deal with:
a) Peter Schiff...
b) promotes dividends.

Peter Schiff is an unreliable source. I have no respect for him. There are various gurus I don't necessarily agree with who, nevertheless, I find to be well-informed and illuminating; Jeremy Siegel would be an example. Schiff is not one of them. He's a permabear, Johnny One-Note, with ideological blinkers. In 2009 he said gold would go to $5,000. It is currently at less than $1,500. He's also politically biased and politically involved, even having, at one point, run for Senate. Call him a "would-be politician" and write him off.

Dividend stocks are a category of stocks that differ slightly, in an objective way, from non-dividend-paying stocks. So, like other stock categories, they are sometimes better and sometimes worse than other stocks, and there are always fans to promote some stock category as just plain superior to others (in this forum, it is often "small-cap value.")

It is actually math, that if two mutual funds have identical growth charts, they are identically good in all respects. It doesn't matter whether you take a certain number of dollars out of the fund by selling some of the fund, or whether it leaks out naturally in the form of dividends, the result is the same. This is a growth chart that compares the Vanguard Total Stock Market Index Fund (orange) and the Vanguard High Dividend Yield Index Fund (blue). As you can see, there just isn't much difference between them. If anything, Total Stock happened to have a tiny, meaningless, chance edge over this time period. Look carefully at this chart and be sure you understand it. It comes as close to exploding the myth of dividend stocks as anything you could possibly see.

In particular, notice that there was no big difference in 2008-2009. Dividend stocks crashed along with everything else.

Image
Annual income twenty pounds, annual expenditure nineteen nineteen and six, result happiness; Annual income twenty pounds, annual expenditure twenty pounds ought and six, result misery.

spectec
Posts: 1437
Joined: Mon Jul 14, 2014 8:00 am

Re: Peter Schiff Promotes Dividends to Protect Against Speculative Market Valuations

Post by spectec » Fri Mar 02, 2018 11:33 am

If one must see a dividend in order to "keep management honest", wouldn't it be preferable to find companies with honest management and invest in them? If I can't trust management to deploy earnings profitably, I shouldn't trust them with the earnings that remain after paying me a dividend.
Don't gamble; take all your savings and buy some good stock and hold it till it goes up, then sell it. If it don't go up, don't buy it. - Will Rogers

Jiu Jitsu Fighter
Posts: 180
Joined: Mon Nov 21, 2016 10:22 am

Re: Peter Schiff Promotes Dividends to Protect Against Speculative Market Valuations

Post by Jiu Jitsu Fighter » Fri Mar 02, 2018 12:08 pm

david1082b wrote:
Thu Mar 01, 2018 6:08 pm
Jiu Jitsu Fighter wrote:
Thu Mar 01, 2018 5:14 pm
I didn't hear any keynesian/neoclassical economists pounding the table about a looming housing bubble in 2006.
Paul Krugman did articles in 2005 talking about the housing bubble:
some people still deny that there's a housing bubble. Let me explain how we know that they're wrong. http://www.nytimes.com/2005/08/08/opini ... sound.html
I don't know why you'd expect to "hear" economists "pounding the table" about issues - you need to read a lot of their stuff before you can know what they have said.
They still think the Phillips curve is legit. The 70s, the 90s, and the 2010s have debunked the relationship of inflation and employment,
I found a blog post from Krugman from 2012 with a nuanced take on the Phillips curve:
I often hear people saying that the experience of the 70s refuted the whole notion of a Phillips curve. No, it didn’t. What it did was show that unemployment wasn’t the only determinant of current inflation; expected future inflation is also crucial.

And what the Phillips curve with expected inflation implied was “clockwise spirals” in unemployment-inflation space. Suppose you came into a recession with, say, 10 percent inflation. This inflation rate would fall in the face of high unemployment — and expected inflation would eventually fall too, so that when unemployment fell again inflation would remain lower than it was pre-recession (until the next boom).

Both the slump of the mid-1970s and the slump of the early 80s fitted this pattern, but the recent slump has not: [chart]

So why the difference? Some people have pointed to the failure of inflation to fall by a lot as evidence that the NAIRU — the non-accelerating-inflation rate of unemployment — has risen sharply, so that America is now at more or less full employment.

I’m in the camp that says that the expectations-augmented Phillips curve breaks down at low inflation rates, thanks to nominal wage rigidity https://krugman.blogs.nytimes.com/2012/ ... inflation/
A post from 2014 about the post-2008 situation:
In a previous post I mentioned, sort of in passing, that recent data actually look like an old-fashioned pre-accelerationist Phillips curve — that is, unemployment determines the inflation rate, not the rate of change of the inflation rate. https://krugman.blogs.nytimes.com/2014/ ... e-wonkish/
I figured that you were a Krugmanite. Sounds like a lot of gibberish to defend the Phillips curve. There is still no practical application nor does it provide any explanatory power.

But this is coming from a guy who in 1998 predicted that the internet would have no more significant value to society than the fax machine. He did call for the Fed to create a housing bubble to offset the slack in demand during the very minor recession of 2000-2002 (yes, I know that stocks plummeted, but the economy could have easily gotten out of the recession on its own without Greenspan's 1% Fed funds rate). How did that turn out anyway?

Oh, and I almost forgot, he stated right after Trump was elected that markets would plunge similar to the Great Depression and may never recover. Another prescient statement.

No, I'm not a Republican, but I'm sure I'm considered one of THOSE PEOPLE who he refers to in his smug and very ignorant New York Times column. I'm not a fan of Trump, but was glad that he was awarded the number 1 prize for Fake News. Krugman is a complete joke.

User avatar
snodog
Posts: 267
Joined: Fri Dec 21, 2007 5:33 pm
Location: Pennsylvania

Re: Peter Schiff Promotes Dividends to Protect Against Speculative Market Valuations

Post by snodog » Fri Mar 02, 2018 2:30 pm

Jiu Jitsu Fighter wrote:
Thu Mar 01, 2018 5:14 pm
What is your issue with the oldest school of economic thought? I didn't hear any keynesian/neoclassical economists pounding the table about a looming housing bubble in 2006. They still think the Phillips curve is legit. The 70s, the 90s, and the 2010s have debunked the relationship of inflation and employment, but the Fed still sticks with it. If I hear the phrases, "aggregate demand", "injecting capital", or "our economy is based on consumption", I'm going to puke. No mention in MSM about savings and production and human action.
Doesn't it go against your beliefs to be investing with Vanguard, a socialist organization. :twisted:

Northern Flicker
Posts: 5070
Joined: Fri Apr 10, 2015 12:29 am

Re: Peter Schiff Promotes Dividends to Protect Against Speculative Market Valuations

Post by Northern Flicker » Fri Mar 02, 2018 2:44 pm

I think some people believe a dividend is a contractual obligation like a bond coupon payment. It is just a discretionary distribution of some of the earnings to shareholders. In the abstract, it is the inverse operation to an IPO or other infusion of new cash by investors.

What is true is that some dividend-oriented stocks are companies with unique properties. Traditionally, utilities have had a very stable business model and have not needed as much capital to develop new lines of business. Tech companies, on the other hand, constantly need to enhance their products or develop new products and lines of business because of the rapid obsolescence of tech products.
Index fund investor since 1987.

Jiu Jitsu Fighter
Posts: 180
Joined: Mon Nov 21, 2016 10:22 am

Re: Peter Schiff Promotes Dividends to Protect Against Speculative Market Valuations

Post by Jiu Jitsu Fighter » Fri Mar 02, 2018 5:48 pm

snodog wrote:
Fri Mar 02, 2018 2:30 pm
Jiu Jitsu Fighter wrote:
Thu Mar 01, 2018 5:14 pm
What is your issue with the oldest school of economic thought? I didn't hear any keynesian/neoclassical economists pounding the table about a looming housing bubble in 2006. They still think the Phillips curve is legit. The 70s, the 90s, and the 2010s have debunked the relationship of inflation and employment, but the Fed still sticks with it. If I hear the phrases, "aggregate demand", "injecting capital", or "our economy is based on consumption", I'm going to puke. No mention in MSM about savings and production and human action.
Doesn't it go against your beliefs to be investing with Vanguard, a socialist organization. :twisted:
My belief that the Phillips curve is worthless somehow precludes me of associating with Vanguard, and how is Vanguard a socialist organization? Sure the shareholders of the funds technically own the company, but the company competes in a market-based economy, the employees are hired on a voluntary basis and are paid wages commensurate to their skills, knowledge and experience, and investors are free to invest in their funds, use their advisory service, or take their money elsewhere.

My disbelief of the value of the Phillips curve and defender of the Austrian School (I have issues with some of their premises) is contradictory to investing in a passively managed, globally diversified, low-cost portfolio?

User avatar
Tyler Aspect
Posts: 1568
Joined: Mon Mar 20, 2017 10:27 pm
Location: California
Contact:

Re: Peter Schiff Promotes Dividends to Protect Against Speculative Market Valuations

Post by Tyler Aspect » Fri Mar 02, 2018 7:06 pm

redhawkwatch wrote:
Tue Feb 27, 2018 7:53 pm
I have been reading one of Mr. Schiff's books from 2008. He states that higher dividend paying stocks are better than capital appreciations stocks, because they give value besides the capital appreciation, which can be pushed high simply depending on consumer sentiment, rather than actual earnings.

Any thoughts? Seemed like an interesting idea. Don't worry, I'm not all in with Schiff, I just appreciate another perspective. And, of course, I would only use Vanguard Index funds if I were interested in this (Admiral shares).
No, what you say does not make any sense. Emphasizing dividend is a slippery slope into the trap of yield chasing. Eventually you might wonder if the dividend yield is so good, why did my principle value drop down to near zero?
Past result does not predict future performance. Mentioned investments may lose money. Contents are presented "AS IS" and any implied suitability for a particular purpose are disclaimed.

User avatar
LadyGeek
Site Admin
Posts: 58767
Joined: Sat Dec 20, 2008 5:34 pm
Location: Philadelphia
Contact:

Re: Peter Schiff Promotes Dividends to Protect Against Speculative Market Valuations

Post by LadyGeek » Fri Mar 02, 2018 7:17 pm

This thread has run its course and is locked (getting contentious, topic exhausted). See: Locked Topics
Moderators or site admins may lock a topic (set it so no more replies may be added) when a violation of posting policy has occurred. Occasionally, even if there are no overt violations of posting policy, a topic (or thread) will reach a point where the information content of the discussion has been essentially exhausted and further replies are much more likely to cause distress to the community than add anything of value.
Wiki To some, the glass is half full. To others, the glass is half empty. To an engineer, it's twice the size it needs to be.

Locked