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By this logic, there was a point in time in Amsterdam when some tulip bulbs were "worth" more than large houses. You are technically correct that facebook is c
by lucasjung 16y ago
By this logic, there was a point in time in Amsterdam when some tulip bulbs were "worth" more than large houses. You are technically correct that facebook is currently worth tens of billions of dollars, but is that real, lasting value or is it a transient inflation of price caused by lots of people investing with very imperfect knowledge of the company and the market? An IPO might reveal the truth.
- mhp 16y agoBy that logic, only sustaining value for some period of x days would allow you to say the value of something is y. That doesn't seem accurate to me. How many days is x?
- lucasjung 16y agoI don't think it's schedule-driven, I think it's event driven. In particular, I think that there are two events that value must survive in order to be demonstrated real: 1: End of severe information asymmetries (going from private to public--i.e. an IPO--will typically do this). 2: A crisis of confidence. A crisis of confidence can temporarily depress the market valuation of something with real value, but the fundamental underlying strengths will drive the price will recover as the crisis abates; inflated value will not recover in this manner after a crisis of confidence because the crisis will have served to expose the fundamental underlying weakness.