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Strategies & Market Trends : Value Investing
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To: Andrew who wrote (3860)4/17/1998 1:49:00 AM
From: Paul Senior  Read Replies (1) of 78476
 
Andrew: Well I'll give you that if earnings volatility increases, then the multiple on stock that buyers would be willing to pay could, should, or does decrease. But you say this volatility is due to increases in cost of goods sold, specifically hiring people for production. I assume any capital that the extra people need are counted once in operating leverage (loans to buy equipment). So you are assuming that production workers are a fixed cost?? Because operating leverage from debt ... that stays mostly fixed (unless equipment is sold), but workers... they are dismissed all the time. What's the big deal?
As I read your thread you are saying if Intel hires more people to produce (more) product, that is a bad thing for shareholders. I agree. We need to find a way to produce product without people. Or better yet, we need to find companies with lots of people on the payroll where managers can dismiss them by the 10's of thousands. That juices the stock price real good. -gg- Paul Senior
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