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Dividends versus Usury
Thursday 4 June 2009
Coupons, Dividends or nothing at all?
That is the question right now.
Until Great Panic and Depression economic disorders, ladies and gentlemen of means prefer annuities, bonds or mortgages secured by real property.
They know what they are going to get, and the regular interest payments cover the bills like clockwork.
Then inflation, leverage, bankruptcies and insolvencies rear their ugly sawtooth hydra heads as Panics and Depressions. All bets are off as coupon contracts are broken.
Too much debt leverage topples the financial scaffolding and IOU holders are burned by cascading defaults.
With dividends, even if we are a founding family shareholder with supermoney, although they usually keep up with inflation, we know there is always a risk that in bad enough times, there might be dividend and price cuts enough to affect our lifestyle and accounts, so we maintain cash reserves.
Or could have, should have, would have.
How the high and mighty have fallen:
The Americas and Tulip Bubbles of the 1600s, South Sea and Mississippi Bubbles of the 1700s, Bank, Embargo and Railroad Panics of the 1800s, The Great Depression and War of the 1900s, and now The Greatest Depression of the 2000s ruined many unsuspecting people including Sir Issac Newton, Master and Warden of the Royal Mint. http://recession.org/history
Today, GDP down over 10% defines Depression, even if nattering nabobs don’t utter the taboo word yet.
It seems at least once a century, no more than five score years, we have a lollapalooza of a liquidation recession we call a depression.
Then we find out what we forgot our grandparents warned us:
Get out of debt, Save for a rainy day.
