In addition, standard "share valuation" techniques such as "share price equals discounted present value of future dividends" become false. When the capital development of a country becomes a by-product of the activities of a casino, the job is likely to be ill-done. — John M. Keynes
But in the short, medium and long term the price reflects investors' expectations of net income=profits, and whether or not this is paid out in dividends is not generally more than a tax issue.
running a company for stockholder value becomes like running a PR operation
Companies are run like participatory theatre - there's an outline plot, and everyone is supposed to follow that plot, whether or not it makes sense.
Unfortunately different characters have different goals. A common CEO sub-plot involves doing something bold and dramatic - but often rather stupid and financially destructive - in order to Make A Point about one's CEOness.
In the limit this leads to scenes like Iraq.
If there's such a thing as real value, it's going to have more in common with how much people are willing to pay for the tickets which give them a chance to feel part of the show than with any realistic expectation of future returns.
So the PR/story-telling angle creates 'real' value.
How many listed companies have valuations close to the figures that would make sense if fundamentals really mattered?
It is therefore "notional" dividends/ retained profits which underpin market value in the same way as notional property rental values underpin property prices, with "Buy to Let" as the arbitrage.
There's a big difference between:
(a) making Profits - and not paying dividends for tax reasons; and
(b) making losses - so there aren't any profits to retain.
Most DotComs were profit free zones, some without even GROSS revenues, never mind NET.
And note how he extols the gilded age and the robber barons, and the social Darwinist narrative. Maybe in the 1980's the lid was lifted by the fact of the fading memory of the Crash of 1929 and the Great Depression. After all, in the introduction to his book The Great Crash 1929, J K Galbraith says that it is memory and not regulation that prevents speculative bubbles and crashes. When the capital development of a country becomes a by-product of the activities of a casino, the job is likely to be ill-done. — John M. Keynes
