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There is only one valuation principle in finance. It's present value of future cash flows. All other methods are approximations or this
by rs86 8y ago
There is only one valuation principle in finance. It's present value of future cash flows. All other methods are approximations or this
- decentralised 8y agoHow about VCs? Don't they fund projects based on future value?
- ajiang 8y agoVCs also use projected future cash flows or as the previous commenter said, an approximation of such.
- decentralised 8y agoSo how do you value open-source "commons"? ICOs were created precisely because these projects aren't supposed to generate profit.
- realsunnyg 8y agoI think most were designed to create a profit for at least one party...
- decentralised 8y agoSure, but in which concrete cases, and how was it somehow morally reprehensible to seek compensation for open-source work?
- hndamien 8y agoI think the "cash" part is the confusing sticking part here. What currency is that in? Cash is also a position? Discounted for inflation, deflation etc. The framing of the valuation model is confined to the context of the monetary system it is within. Ie - assuming with an inflationary monetary system, I have $x cash. Where can I allocate it (at what valuation) such that I can generate a greater yield - all monetary policy implications considered.
- Retric 8y agoNope, because you can transfer between cash systems. Outsized examples to prove a point. If Bitcoin’s are worth 1 cent each then cash flows in USD can also turn into large Bitcoin cash flows. But, Bitcoin cash flows could not turn into large USD cash flows. Further, if Bitcoin’s value is dropping at say 15% per year then loaning them out at 10% per year is losing money vs converting them to USD, and doing nothing.
- hndamien 8y agoYou have completely not understood anything I have written, and your example makes zero sense. Pointing out the flaws it what I can make of it - you are talking about currency conversion (this is two different monetary systems and cash positions in both). Second, your example is again talking about 2 different systems and by that metric, everybody has been losing money during the equities bull market because Bitcoin has outperformed the S and P every year bar 2, and when looking at raw purchasing power, still has outperformed even after an 85% crash. Obviously this is stupid, because in the context of the monetary system those investments were made, Apple and Tesla have done fine.
- deleted 8y ago[deleted]
- Retric 8y agoBitcon has on net lost money every year after it was created through mining. People spend money mining, and add money to the system but the only way to extract money is for someone else to buy in. You can do a silly calculation and say if we could find a magical buyer then the net gain is their increase in price, but there is not such magical buyer which is why it's been tanking. The core problem is Bitcoins are not a productive asset. They can't produce any cash flows.
- hndamien 8y agoDoes cash produce cashflows? No, it doesn't - yet you would have been better off holding cash than Nvidia this year. (Note - Nvidia has cashflows and pays dividends!)