.....It was just a rhetorical device
well, it seems more like a crutch than a device. some people obviously need crutches (or baseball bats in some cases) and others don't. i'd like to think you fall into the latter category.
Over the long-term, the DCF will rule in the end. If we did have all of the various inputs we needed,
but that's the thing...you're saying if we knew all the things that will matter in the future, we could predict the future and thus discount it back to the present. to which i'd say, sher, but...
we don't know those things. instead, we make guesses or approximations, and errors in these approximations expand greatly into errors in end results. that is the real weakness of any DCF-based approach. like any model of a complex system, it requires all the right inputs in all the right weightings, but there's no way to know in advance what those should all be. it is even worse than meteorological forecasting, because economic behavior is highly reflexive (in the Sorosian sense). and in fact, meteorologists are better at forecasting the weather than economists and market analysts are at forecasting in their fields (this has been shown to a statistically significant degree in academic studies).
so the logical conclusion of your point is that the method which is accurate is the method we can never use.
Qualcomm's share price is going get to that identical destination (plus or minus some unknown delta) regardless of it's decision on expensing options.
one must be a little careful with "in the long run" reassurances. e.g., Enron's share price got to that identical destination of zero despite the fact that it lied to the public. but that was no excuse for them not to tell the truth. that information, which is available now for Enron and various other scandal stocks, was not available when they were at 80 dollars a share.
while the market one hundred years from now will go where it goes regardless of the options decision, that is neither here nor there for investors today. the point is to have the most accurate description of a company's economic profitability available to investors today, not 20 years from now.
and i submit that expensing options will add to this description of economic profitability today. |
