When you never sell - you're a coffee canner - and you only buy when there's a long dividend track record and high yield because of some market panic or temporary situation punishing a stock, so the return you're getting is only the cash in dividends, are you then a speculator still? Surely you're speculating on the company continuing its capital allocation policy, and having the free cash to do it. It's a probabilistic decision. But if that is speculation, then if I buy a house because I want to live off the rent I get from the tenants, then I'm speculating as well, because gouvernment may turn socialist and tax all may gains away or seize my property, or Russia may bomb my country and house away, or an earthquake or or... Then all investment is speculation. Is that the point you want to drive home? But then all investment is futile, and we can just burn through our savings and go to the beach.
Thats why we called it the *continuum* of force and not the "everything is unknowable and futile and nothing is investable so go to the beach" of force. Use the force, Luke.
Pushback: a speculator's *only* path to profits is to sell something at a higher price to someone else. Valuation doesn't need to factor in so long as the speculator thinks someone else will pay more. It's an exogenous return...it comes from the outside.
A value investor can make money this way...and often does, but they can also say "if I had the capital, I'd buy this whole company at this px." Intrinsic value matters. A speculator doesn't care.
Of course there's value traps. And most investors *can't* buy the whole company and therefore might rely on speculators to see value.
Or the company can return capital (an endogenous return). In this instance, you could make a healthy return without others seeing value.
I understand the point...we all primarily want others in the market to see what we see. But there is still a distinction between buying companies below their intrinsic value with a margin of safety and buying internet coins because someone else may pay more.
Are you saying that a there are millions of like minded contrarians calling themselves value investors ?
When you never sell - you're a coffee canner - and you only buy when there's a long dividend track record and high yield because of some market panic or temporary situation punishing a stock, so the return you're getting is only the cash in dividends, are you then a speculator still? Surely you're speculating on the company continuing its capital allocation policy, and having the free cash to do it. It's a probabilistic decision. But if that is speculation, then if I buy a house because I want to live off the rent I get from the tenants, then I'm speculating as well, because gouvernment may turn socialist and tax all may gains away or seize my property, or Russia may bomb my country and house away, or an earthquake or or... Then all investment is speculation. Is that the point you want to drive home? But then all investment is futile, and we can just burn through our savings and go to the beach.
Thats why we called it the *continuum* of force and not the "everything is unknowable and futile and nothing is investable so go to the beach" of force. Use the force, Luke.
Pushback: a speculator's *only* path to profits is to sell something at a higher price to someone else. Valuation doesn't need to factor in so long as the speculator thinks someone else will pay more. It's an exogenous return...it comes from the outside.
A value investor can make money this way...and often does, but they can also say "if I had the capital, I'd buy this whole company at this px." Intrinsic value matters. A speculator doesn't care.
Of course there's value traps. And most investors *can't* buy the whole company and therefore might rely on speculators to see value.
Or the company can return capital (an endogenous return). In this instance, you could make a healthy return without others seeing value.
I understand the point...we all primarily want others in the market to see what we see. But there is still a distinction between buying companies below their intrinsic value with a margin of safety and buying internet coins because someone else may pay more.
Definitely a spectrum!