Investment in the Coming Bull Market

[Uccmal]

Title sounds like a good book title.

 

Anyway, I am sort of thinking what people in general will be looking for when they collectively start re-investing.  I am thinking we will be moving back into the show me the money culture that prevailed at the end of the Great Depression and for many years afterwards.

 

It appears the following inventions of the last 25 years will have much less appeal for investors going forward:

1) Stock options for employees at the expense of shareholders.   

2) Share buybacks.  In themselves not a bad thing, but massively overused.

3) Huge CEO salaries and bonuses, and expecially golden parachutes.  I would think in 3 years, should there be a modicum of recovery that a company that gives a departing executive 100 M dollars will see its share price crushed into oblivion.

 

The sting is going to last a real long time from this event.  I know it will for me.

 

Looking forward, when I invest I will be expecting the basic things from a company:

1) Dividend that pays out at least 50% of annual earnings - I will make exceptions for 2 people, and two concepts going forward:  Prem Watsa, Warren Buffett, fast growing entepreneurial companies (i.e. RIMM), and deep value plays.  Otherwise, if you dont pay a rising dividend with most of your earnings you dont get my investment dollar.

2) If you pay the CEO more than 2-3 Million/year including bonuses, there had better be a real good reason.  I wont buy the shares.

3) The moment there are any CEO pay shenanigns, golden parachutes, or anything else not totally aligned with shareholders I am history as an investor. 

4) Management aligned with shareholders via significant publicly purchased stock ownership.  Or I wont buy the shares.

 

As I said I will exempt certain stellar performers from the rules but then they are the ones who made the rules up so I needed bother with the exemption.  I will want companies to show me the money so I can keep the cash flowing and decide if I want to buy more shares myself.  Dividends keep management focussed, and paying taxes on the dividend beats the hell out of watching companies overextend themselves and then crash and burn to the point where there is no oppotunity to pay any taxes at all.

 

I am thinking that those who dont follow the basic "show me the money" rules will see their share prices go no where for at least the next 20 years. 

[arbitragr]

I don't think there will be a full scale bull market like you saw in the 1990s again for a while.

 

After we get out of this mess, we might have to worry about inflation problems and such. Bit similar like the 1970s.

 

Or we could get a general sense of despair and fear prolonging about the stock market like in the 1930s.

 

could be a long time.

[oldye]

someone else said it best, Fairfax Fifty Hello!

 

 

 

[nodnub]

ahh, Freedom Fifty Hello. 

 

For some boardmembers here it might be Freedom Forty Hello :)