Here's one way to look at it. Profits are both means and ends of capitalistic business. As ends, profits are incentives. As means, profit is the surplus labor (etc.) that must be done to maintain or enlarge capitalist incentives. (The old line that the harder workers work, cet. par., the more capitalist money is working for the capitalists.)
As ends profits are paid out in dividends in t. As means, they are reinvested in t+l. For shareholders, increased dividends are fine, but (cet. par.) increased reinvestment is better, because reinvestment uses profits to make more profits, in an already profitable employment, while increased dividends may or may not be used thusly. Corporate growth means that a company is a/ making money and b/ using the money to make more money. Growth (reinvestment of profits) becomes the end as well as the means to more profit. Then profits are reinvested, i.e., when the company grows, I don't think that investors distinguish very much between profits and new investment. Growth indicates, in this simple model, that the company is profitable, and is trying to become more profitable. The faster the growth rate, the faster profits are growing, cet. par.
What happens in the stock market? If a company uses all of its profits to grow, this growth is capitalized via an increase in stock prices. If profits are expended in dividends, stock prices won't grow. I.e., growth not profits is the real payoff from the standpoint of the stock market.
I think that the double counting problem comes when t is confused with t+l. It's only in t+l that profits are reinvested, hence the company grows, hence stock prices rise. If t+l profits are dissipated in dividends, no growth, and stock market prices fall. The stock market thus sees profits as means to the end of growth, i.e., of more future profits.
It seems to be that this is one (of many) meanings of "self-expanding capital." Doug, a quick question, after kudos for the last LBO, an excellent issue.
If stock prices are rising today only, or mainly, in the sector of big capital (mostly also transnational), and if big capital is buying it own stock (to retire it) as the main demand side explanation of rising stock prices, isn't this speculation pure and simple, and finally a Ponzi game? Especially when companies borrow more to buy and retire their stock? Thanks for any clarification. Jim O'Connor