Company Profits & Stock Prices on Government Money?

Discuss all general (i.e. non-personal) investing questions and issues, investing news, and theory.
Post Reply
Topic Author
Mr. Jelly
Posts: 43
Joined: Fri Sep 21, 2018 5:12 pm

Company Profits & Stock Prices on Government Money?

Post by Mr. Jelly » Thu Mar 26, 2020 12:56 pm

I need an explanation as to how companies are going to show a profit, pay dividends and have stock processes increase on government money. How do you foresee this panning out?

Thesaints
Posts: 3453
Joined: Tue Jun 20, 2017 12:25 am

Re: Company Profits & Stock Prices on Government Money?

Post by Thesaints » Thu Mar 26, 2020 1:01 pm

Mr. Jelly wrote:
Thu Mar 26, 2020 12:56 pm
I need an explanation as to how companies are going to show a profit, pay dividends and have stock processes increase on government money. How do you foresee this panning out?
It is future earnings, from all the locations and facilities they don't have to shut down but can keep open using loans from the government.

Iridium
Posts: 645
Joined: Thu May 19, 2016 10:49 am

Re: Company Profits & Stock Prices on Government Money?

Post by Iridium » Thu Mar 26, 2020 3:48 pm

Mr. Jelly wrote:
Thu Mar 26, 2020 12:56 pm
I need an explanation as to how companies are going to show a profit, pay dividends and have stock processes increase on government money. How do you foresee this panning out?
Virtually every currency has been fiat money without backing for decades. Companies report their earnings in the local currency. So, for US companies, their income is reported in US dollars, their expenses are shown in US dollars, and their profit is the difference between the two. Squirrly things happen in the finance sector (somehow, money multiplies when deposited at banks). However, to Main Street, there really isn't much difference between universally accepted government money, and, say, gold. Everyone just pretends that USD are valuable, it becomes the medium of exchange, and as a result, it actually has value. I know it sounds like one day people are going to wake up and say: "who cares about all these sheets of paper", but we have generations of experience that this isn't going to happen, though being invested in equities is a nice hedge against that risk, as regardless of what happens to the underlying currency, you'll still own 0.0001% of every publicly traded company, which all hold real assets that would presumably remain valuable in the event of spontaneous disinterest in USD.

I suspect that I am misinterpreting the question, as we are about half a century past worrying about how the economy will work off of the gold standard, but I don't know how else to interpret the question.

User avatar
watchnerd
Posts: 5544
Joined: Sat Mar 03, 2007 11:18 am
Location: Seattle, WA, USA

Re: Company Profits & Stock Prices on Government Money?

Post by watchnerd » Thu Mar 26, 2020 3:54 pm

Mr. Jelly wrote:
Thu Mar 26, 2020 12:56 pm
I need an explanation as to how companies are going to show a profit, pay dividends and have stock processes increase on government money. How do you foresee this panning out?
I don't understand your question.

Defense contractors regularly make profits on "government money".

Money is money.

Perhaps I don't get what you're asking...
70% Global Market Weight Equities | 15% Long Treasuries 15% short TIPS & cash || RSU + ESPP

User avatar
firebirdparts
Posts: 1127
Joined: Thu Jun 13, 2019 4:21 pm

Re: Company Profits & Stock Prices on Government Money?

Post by firebirdparts » Thu Mar 26, 2020 4:20 pm

Profits are a very specific thing, so it may be that government "support" doesn't ever show up as profit. It really just depends on exactly how the money is received and where it goes on the books. We ought to take one example and see if we can figure it out.
A fool and your money are soon partners

Topic Author
Mr. Jelly
Posts: 43
Joined: Fri Sep 21, 2018 5:12 pm

Re: Company Profits & Stock Prices on Government Money?

Post by Mr. Jelly » Fri Mar 27, 2020 4:16 pm

Perhaps I don't get what you're asking...

I probably don't know enough or how to ask my question correctly. When stimulus money is loaned to companies it would appear to be an additional expense to the companies already in a distressed industry in distressed times. So if I am to invest in this company how are they going to make much of a profit or pay much as far as dividends. It's hard for me to see, with the headwinds the company is facing, how the company will thrive and make it worth while to invest in it.

User avatar
watchnerd
Posts: 5544
Joined: Sat Mar 03, 2007 11:18 am
Location: Seattle, WA, USA

Re: Company Profits & Stock Prices on Government Money?

Post by watchnerd » Fri Mar 27, 2020 4:23 pm

Mr. Jelly wrote:
Fri Mar 27, 2020 4:16 pm
Perhaps I don't get what you're asking...

I probably don't know enough or how to ask my question correctly. When stimulus money is loaned to companies it would appear to be an additional expense to the companies already in a distressed industry in distressed times. So if I am to invest in this company how are they going to make much of a profit or pay much as far as dividends. It's hard for me to see, with the headwinds the company is facing, how the company will thrive and make it worth while to invest in it.
Why is it an additional expense?
70% Global Market Weight Equities | 15% Long Treasuries 15% short TIPS & cash || RSU + ESPP

Topic Author
Mr. Jelly
Posts: 43
Joined: Fri Sep 21, 2018 5:12 pm

Re: Company Profits & Stock Prices on Government Money?

Post by Mr. Jelly » Sat Mar 28, 2020 6:51 pm

Why is it an additional expense?

I am assuming it will need to be repaid. Am I wrong?

User avatar
watchnerd
Posts: 5544
Joined: Sat Mar 03, 2007 11:18 am
Location: Seattle, WA, USA

Re: Company Profits & Stock Prices on Government Money?

Post by watchnerd » Sat Mar 28, 2020 6:59 pm

Mr. Jelly wrote:
Sat Mar 28, 2020 6:51 pm
Why is it an additional expense?

I am assuming it will need to be repaid. Am I wrong?
It depends. For small businesses, Kashkari mentioned potential loan forgiveness if they don't lay anyone off after a certain amount of time.

If small businesses get that deal, it opens the door for something for big corporations, too. Maybe not as generous.

The corporations have a lot of leverage over conditions they might want in order to avoid laying off workers and the ensuing political damage.

It could be a 0% interest loan with partial forgiveness. Or payment by issuing stock.

All sorts of things that could bury it in EBIDTA.
70% Global Market Weight Equities | 15% Long Treasuries 15% short TIPS & cash || RSU + ESPP

Post Reply