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Hmm. I think the Bloomberg article oversimplified Tobin's work to the point where a) your interpretation of the article's claim is correct but b) definitely not
by namecast 11y ago
Hmm. I think the Bloomberg article oversimplified Tobin's work to the point where a) your interpretation of the article's claim is correct but b) definitely not in line with what Tobin claimed.
If Tobin were still alive, I think he would insist that intellectual property (read: code, patents, trademarks and software licenses) also be included. He didn't care about 'factories, machines and inventory'; he cared about 'replacement costs'. The author seems to have glossed over that bit for the sake of brevity and clarity, and in the process accidentally introduced a logic error, at least IMHO.
- viggity 11y agoObviously, however, replacement cost for intangibles is impossible to estimate accurately. Especially if you consider the risk that the "replacement" is a failure or doesn't accurately replace the institutional knowledge, intellectual property and goodwill the company has accrued. It is fair to say that stock prices are not representative of current value, but rather the long term value and growth the company has yet to realize. So in that sense, Tobin is right, but the growth the company has yet to realize is really just goodwill accrued as an asset. Meh. I'm rambling now.
- jackreichert 11y agoI always understood that potential revenue, to a certain extent, is baked into the value of the company. When things change in the market it doesn't necessarily effect the values of the companies, it's when something unexpected happens, because the market represents a perceived future value of the company.
- deleted 11y ago[deleted]