Eric thinks it's irrational. It's not his money.
William - I don't think I've ever characterized the risks you take as irrational - in truth, I don't know what risks you do take, so I can't really comment on whether I believe such risks are rational or not.
What I have written at length about, however, is the market capitalization and profit-making potential of many of the internet and b2b companies - some of these companies, I believe you own stock in. And the essence of what I have written is this: there is a tremendous risk that many of these companies (even the "blue-chip" ones, including Yahoo and Amazon) will never make enough profit to justify their current market caps by traditional fundamental methods of valuation. You may disagree with this (I assume you do), and I would guess that you probably disagree because you (1) believe in the profit making potential of these companies, or (2) because you don't believe in traditional fundamental methods of valuation. Or, your disagreement could be due to some combination of these two reasons.
I would be interested in knowing what methods, if any, you use to determine an "appropriate" value for a security - if you are ever able to look at a security and say "it is over-valued" or "it is cheap" and what factors you evaluate in order to make such determinations. I would also ask you if you feel it is important that a company's stock price has any relationship to the profit making potential of the company? If so, how would you characterize or define that relationship?
Thanks,
-Eric |
