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Rationally priced assets are valued by their prospective value. In principle, the valuation seems overly simplistic. Corporate stocks — the combination of peop
by bmh_ca 11y ago
Rationally priced assets are valued by their prospective value.
In principle, the valuation seems overly simplistic. Corporate stocks — the combination of people and entitlements that can be wielded to generate revenue – should be more than the sum of the value of the piecemeal assets, IMHO.
Even if not overly simplistic, I feel like the methodology would leave a lot of room for broad speculation. How did they value: future redeemable assets, trade assets, intellectual property, intangible leverage, market and demographic prospects, cultural distinctions of the corporation, and goodwill? These things all tend to be waffly in the accounting, but they have a real impact on future income and therefore the prospective value of the company.
Everything I have read about Tobin suggests that the man was spectacularly clueless, and every time I read something about him I cringe and emit some guttorial sigh. In all likelihood I deeply misunderstand his thinking, but I have yet to see anything remotely resembling clear, persuasive arguments in defence of his ideas, which seem tragically disconnected from economic reality.
- VLM 11y agoAh but the interesting part isn't the long term correction factor but the rather shocking change over just a couple years. What has really changed in the last five years economically to result in such an impressive increase? Oh, nothing? Well, these things do vary randomly over time while tending to revert to the norm. It is true, that when I toss a ball into the air, the error of my measurement from the instantaneous position of the ball to the gravitational center of the earth is very fuzzy. In fact the error bars are probably wider than the measurement of height given enough hand wavy argument and bad measurement tools. I agree with your interpretation of that observation. I really don't have any idea how far away that baseball is from the center of the earth. None the less, toss the ball up in the air higher than you've ever seen it tossed before, its coming back down faster than ever before, eventually. Or rephrased it doesn't seem to be a random walk error where the odds of being higher or lower are always 50:50 no matter if its right on 1.000 or higher than its ever been. It does seem to revert to the norm. So if its higher than its ever been, then the odds of reversion to the norm in the near future are higher than they've ever been...