by Jeff Nielson, Silver Gold Bull:
In our daily lives, we learn that there are many immutable principles of cause-and-effect. Drop an object from your hand and it will fall down, not up. Throw a rock at a pane of glass and it will break. Put an ice cube in the sun and it will melt.
So too it is with the cause-and-effect known as dilution. Whether we are an adult buying watered-down booze from a bar, or a child buying a watered-down beverage from a lemonade stand; we immediately comprehend that diluting the product has reduced its value – and thus we refuse to pay the same price for it.
Similarly, should a jeweler attempt to tell us that (less pure) 10-karat gold is worth as much as (more pure) 24-karat gold, we would simply scoff at such nonsense and walk away. And as I have noted several times in prior commentaries, even the dim-bulbs in the mainstream media can grasp the concept that if a company prints up a lot of shares (and thus dilutes shareholder equity) that the value of its shares must decline.
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