XPost: can.general, can.politics, ott.general   
   From: Canuck57@nospam.com   
      
   On 14/10/2011 9:30 PM, John Fleming wrote:   
      
   >> $But when Obama shoots his mouth off, accusing companies of holding cash,   
   >> $he just makes a flipping ass hole out of himself.  Not everyone   
   >> $subscribes to frivolous debt worship.   
   >   
   > Corporations are not government make work projects.  Heck,   
   > if they are building up cash balances, exercising a "do   
   > nothing" option, it is because they don't see a better use   
   > for it.   
      
   Agreed.  I once let almost $100K sit mostly idle or in low but liquid   
   yield for 5 years.  When the day came, I bought into a play.  Turned it   
   to over $220K in 3 years.   
      
   One huge trick to being better off, is just because you have money   
   doesn't mean you have to spend nor invest it.  Money is accumulated by   
   those that know the discipline of managing money.   
      
   Yep, so I agree.  Doing nothing is always an option and many times the   
   right option.  And why some people have money and others have just debt.   
      
   >> $Debt does NOT generate wealth, it consumes it.  You want wealth, you   
   >> $need to shed debt be you a company, a person or government.  But too   
   >> $many fleabaggers deny this fact.  Their envy and greed drive them for   
   >> $"just more debt".   
   >   
   > Sometimes, for example, when a corporation issues debt to   
   > help pay for new machinery, debt can be a useful tool for   
   > increasing earnings.  They key is this.  There has to be a   
   > reasonable likelihood the purpose the money was borrowed for   
   > generates enough revenue to justify the cost of the debt.   
      
   Yes, but if you are a half baked competent accounting, when factoring in   
   the cost of that debt, they add interest and inflation including   
   projections or your products sale costs.  If you borrow a million for   
   machinery, the debt cost isn't a million, it is a million plus interest.   
      
   You would even be wise to do a cash flow plot.  And skip the   
   fleabaggerisms, be very realistic in the estimates.   
      
   >> $When I invest in a company, I do look at the last 3 years of debt   
   >> $accumulation or reduction.  Companies reducing debt tend to be more   
   >> $stable and profitable, wealthier.   
   >   
   > I pay attention to the debt to equity ratio.  If debt is   
   > increasing faster than equity, and there isn't a really good   
   > reason for it, then there is a problem.   
      
   Bingo.  Means they are moving towards a pending possible cash flow   
   issue.  Doesn't mean you discard the stock, just means now is not the   
   right time to buy.  Wait for the price drop and then re-assess.   
      
   > I also want to make sure the company has enough cash flow to   
   > more than cover the cost of that debt.   
      
   Yep, or the price and potential reward is appropriate.   
      
   Say a stock has a realistic 50/50 chance of going bankrupt from cash   
   flow and debt.  Either boom or bust. But the stock is so depressed, if   
   it were not for debt it would be worth $20 and not $1.50.... I might put   
   a small position in if I think the 50% chance of handling the debt or a   
   way out exists.  TCK.B was just such a situation Feb/Mar 2009.  I would   
   do so as the reward offsets the risk.  At $3.50 it had value, just a   
   debt crunch on the way.   
      
   Poker, Texas Hold'em poker strategies talk about it.  Size of the pot   
   does mater to the risk you will take.  I don't gamble, just studied it   
   for the math of odds and rewards calculations.  The concept is similar   
   in investing.   
      
   No way would it make sense to take a 50/50 risk where the reward was   
   less than double++.   
   --   
   Eat the rich, screw the companies and wonder why there are no jobs.  But   
   we have big huge government we can't afford...   
       -- Obama and the lefty fleabagger attitude   
      
   --- SoupGate-Win32 v1.05   
    * Origin: you cannot sedate... all the things you hate (1:229/2)