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Why Stock Dow Jones hit 25,000

Intrinsic Value

Let me rephrase that in something you will understand what the heck is this company worth?  Ok my favorite stock I will use as an example it's Washington Real Estate Investment Trust.  Why I love this company so much?  The dividend is consistent.

Anyways, what is Intrinsic Value why do I care?

Under Trumps new tax plan "Supposedly"  I mean that "Supposedly" corporations are supposed to bring back all the off shore cash and invest in "United States" to create jobs.

Yes the money is probably going to come back the one thing he did well, but not for jobs, corporations will us that cash to auto-mate and replace your jobs with robots, the companies now have cash incentive to do it.

So as you think you are making so much extra cash with Uber you don't really care.  Understand wear and tear on your car and the extra miles you are putting on, as well as strangers in your car and accidents while they are in them. They are profiting off labor and in the end when you ass it up your left with nothing.

So you will see companies also buy back stock that's where  Washington Real Estate Investment Trust comes in.  Symbol (WRE) owns many shopping centers and buildings around Washington, D.C. and surrounding suburbs, including buildings the federal government rents for offices that have long term contracts.  The "Intrinsic Value" in this company is those contracts, the actual physical buildings that have a worth if sold, and it's cash reserves, so when you add that all up you get the "Intrinsic Value" of the stock by dividing the net worth by the total number of outstanding shares.  I have spoken about this in earlier articles that you can re-read so I am going to use a ruff example to explain what will happen as that "Supposed" cash that will create jobs will really be used to buy robots and increase the assets of the company and to buy back stock raising the share price.

You have a company that is trading on the NYSE at it's "Intrinsic Value"; it has 10,000 outstanding shares valued at $100 each. That means the total company is worth is $1,000,000 however of that $1,000,000 it holds $500,000 in cash in a Swiss bank account.  The company earns $500,000 a year this is also figured into it's "Intrinsic Value as part of overall assets. It decides to buy back 5,000 shares with that $500,000 using the new tax laws.  So as the buy back begins the share price starts to rise until again the company is trading at it's "Intrinsic Value" on the NYSE you now have a company after that 1 year buy back program that has 5,000 outstanding shares and it's net worth is $1,000,000 because it also brought in $500,000  of profit so the share price is $200 one year later.

Did the share price rise because the company became more profitable?  No, you owned 1 share of that stock and still have it did you profit?  Yes you bought at $100 it is now worth $200 so the following year the company brings in $2,500,000 in profits, what is value of your new share of stock?  Got it?  Now you understand "Intrinsic Value"

Answer: $1,000,000 + $2,500,000 = $3,500,000  / 5,000 = $700


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