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for gods SAKE!
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lyris buster attempt #1:
>A man approaches you with a beautiful stone and tells you it is a
>diamond and requests you buy it from him. You see it is beautiful but
>you are no gem expert. What to do? You ask a few friends and they all
>advise that it certainly looks like a diamond, and their friends agree,
>and the price seems right, so you buy it. $700 later and you decide to
>pop over to the jeweler to find out how you fared. Oh no! its a piece
>of worthless glass! Problem was, the perceived value was MUCH higher
>than the real value.
I fear much of what you are saying is wrong, Goldlist Cynic. Sorry!
It's like this: price is the last price paid.
{Your diamond analogy is off the beaten track -- that example is
simply fraud. Say I sold you 100 MSFT shares, giving you the
certificates. It turns out, they are just fake. You got ripped off,
and I'm a thief.}
Now, the actual price of diamonds, is a perfect example of how price
is just price.
What is the " ' real ' " value of diamonds? Almost nothing.
They are useful industry, but trivial to make. As jewelry they can
eaisly be replaced by perfect glass (same sparkle, colors etc)
The " ' real ' " value of diamonds, and indeed gold, is just what
people are willing to pay. And that's true of anything.
>Sadly this is how the share market works. Here is a real world example:
>Yahoo! currently has a share capitalization of 10.17 Billion Dollars.
>For the 6 months ended 6/30/01, revenues decreased 28% for a Net loss
>totaling $60M
>http://quote.fool.com/snapshot/snapshot.asp?symbols=YHOO&currticker=YHOO
>So here is a company that has solid material assets of perhaps less
>than $100M and a declining revenue, making a loss of $60M in the last 6
>months... and the shareholders say it is worth 10 billion Dollars!
But this meands nothing, Cynic. Above, YOU have just given a COGENT
analysis of why YOU think Yahoo is worth X.
"Who cares?"
I happen to agree with you (but so what?)
Who says that a company should be valued by the particular qualities
you mention. It sounds logical (and I might happen to agree with
you), but so what?
What if someone else says "oh, that's interesting, the Yahoo brand is
seen by 2.3 times the eyeballs as the Ford Motor Company brand,
therefor, it is worth 2.3 times as much"
Please (yawn) do not get into an argument about why YOUR methods for
valuing a company are so correct. That's the point. It's just an
argument.
>Like I said right in the beginning, "the share price does not represent
>the true value of the enterprise"
In your Yahoo example, you are just saying ...
"the share price does not represent, what I Goldlist Cynic, happen to
think the true value of the enterprise is"
It's just an opinion .. who cares?
I might "know" that Ford Motor Cars is "worth nothing" because I
happen to believe that antigravity engines are about to be invented.
When you use the word "value", it is very simply equivalent to saying
"my opinion"
It is a "value" exactly as in "value judgement"
Thus, when stock analysts sit around and argue, they say things like
"oh, I think that Yahoo is overvalued" or "gee, my analysis shows
that Ford is undervalued" or whatever.
You can subscriube to newsletters that offer lists of "Value stocks"
Of course, those lists are just the opinion of the newsletter writers
as to which stocks at the moment are "undervalued" stocks.
(And that' just opinion. If the newsletters were always or even
"ever" correct we'd all be trillionaires all the time.)
Saying "the share price does not represent the true value of the
enterprise" is at best equivalent to saying "with some stocks, I or
other individuals think the share price is wildly different from my
opinion of what the share price should be."
But price is price paid. There's nothing else.
Your ounce of gold is worth $267.50 for exactly one reason: that's
what a broad range of people will liquidly pay for it today.
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http://www.opinionjournal.com/editorial/feature.html?id=95000852
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http://www.opinionjournal.com/editorial/feature.html?id=95000852
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