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Strategies & Market Trends : Angels of Alchemy

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To: akirasawa who wrote (23805)	12/20/2000 8:15:28 PM
From: amadeus	Read Replies (3) of 24256

I see valuation a bit differently. to me it appears much like the real estate market. the only reason the average house in southern CA is 250,000 is because there are enough people with enough capital competing for ownership. same with stocks. they are worth as much as anyone is willing to pay, given the amount of capital they have, and competition between buyers. there was a huge amount of capital pouring into the markets late last year and early this year... and the analysts were inventing all kinds of bizarre valuation scenarios to find a means of comparing market caps with some external criteria... but now that the capital has dried up, the paradigm for valuations has shifted back to more conservative standards. however, I see this as after the fact, resulting from the scarcity of capital requiring more conservative reasoning to explain lower market caps again. as soon as capital begins to pour back in, whenever that is, we'll see the same scenario play out again.

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