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Comment by AznHisoka | Hacker News Reader

One of the problems with the regular stock market is that valuations are not tied to the future cashflow of the company.

This isn’t how the LTSE works but it would be awesome if there was an exchange that required every company to pay a fixed percentage of their cash flows every year after X years. Combined this with a minimum holding period, and I dare people to bid $300+ for Tesla stock :)

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I don’t get it. There are already plenty of public companies that pay extremely predictable dividends. This is a popular investment type for retirement portfolios, among others.

Why should they be on a separate exchange?

The dividend is not based on their cashflow. So if Apple is paying 1% dividend on a $100 stock price, but their cashflows increase every year, they're still paying you $1 every year.

What I'm suggesting is an exchange where the dividend is a fixed % of their cashflows. Let's say it's 1%. If their cashflow is 1 billion, then 1% of it goes to their shareholders. If it doubles the next year, then 1% of that 2 billion goes to the shareholders.

Combine this with a minimum holding period (ie 1 year), and you've basically now made the stock price equate to its fundamentals. ie how much cashflow it's generating in the future. If investors think it'll go up, they'll bid the price up. not because they want to sell it to a greater fool.

As I understand it, the dividend is set typically in a dollar amount and the % is a metric derived from that. I agree that the figure is (usually) a bit nonsense. However, I don't think your phrasing is as clear as it could be. If Apple announces a 10% dividend with a 1T market cap that's $100b in distribution. If the market cap doubles to 2T later that year, that dividend payment isn't suddenly updated to $200b; it just shows up as a 5% dividend in your typical metrics.

Yes, sorry I explained it incorrectly. That is the right explanation.

I'm not certain, but I think you just described a REIT.

The old Dutch joint stock trading companies were required by their charters to liquidate and return all capital to investors every couple of years. That enforces strict discipline on management. However after a few decades of that owners began to trust managers enough that a permanently capitalized enterprise seemed more efficient.

The development of modern financial capitalism is important and fascinating. These structures that we take for granted -- tradeable claims on assets, separation of ownership and management, perpetual life corporations, etc. -- all came about to solve particular problems.

Personally I don't foresee the LTSE succeeding, but I'm happy to see people try to innovate.

Fascinating. Do you have any suggested books or videos that track the history of finance?

The Rise of Financial Capitalism: International Capital Markets in the Age of Reason (Studies in Monetary and Financial History) https://www.amazon.com/dp/0521457386/ref=cm_sw_r_cp_api_i_i-...

Manias, Panics, and Crashes: A History of Financial Crises, Seventh Edition https://www.amazon.com/dp/B017J5HBMS/ref=cm_sw_r_cp_api_r.pw...

Devil Take the Hindmost: A History of Financial Speculation https://www.amazon.com/dp/0452281806/ref=cm_sw_r_cp_api_i_.a...

A History of Interest Rates, Fourth Edition (Wiley Finance) https://www.amazon.com/dp/0471732834/ref=cm_sw_r_cp_api_i_-c...

A Splendid Exchange: How Trade Shaped the World https://www.amazon.com/dp/0802144160/ref=cm_sw_r_cp_api_i_Hg...

> if there was an exchange that required every company to pay a fixed percentage of their cash flows every year after X years

wouldn't this be roughly the same as bond markets?

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