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Politics : Ask Michael Burke -- Ignore unavailable to you. Want to Upgrade?

To: BGR who wrote (68670)	10/5/1999 8:34:00 PM
From: re3	Read Replies (1) \| Respond to of 132070

value is waiting somewhat less than half a lifetime to get your money back... you wanna buy at pe of 35...i got stocks to recommend...

To: BGR who wrote (68670)	10/5/1999 8:38:00 PM
From: Oblomov	Read Replies (1) \| Respond to of 132070

What do you mean by efficient markets? I am familiar with Fama's work, but I'd be interested in hearing your definition. AA

To: BGR who wrote (68670)	10/5/1999 9:09:00 PM
From: pater tenebrarum	Read Replies (2) \| Respond to of 132070

BGR, with all due respect, belief in efficient markets is just that: belief. markets tend to overshoot and undershoot, often by big margins due to the herd's psychology. if you call the late 90's stock market efficient, you must be dreaming. even if there is no objective yardstick for valuation, efficiency is most certainly a poor explanation for some of the moves certain stocks make. not even Ballmer believes in this anymore...<GGG> regards, hb

To: BGR who wrote (68670)	10/5/1999 11:13:00 PM
From: Simba	Read Replies (1) \| Respond to of 132070

BGR: Have you asked Warren Buffet ? <g> The book by Graham and Dodd discusses a lot about value investing. They say that although the market is efficient in the long run, there are short periods (could be of the order of 5-10 years) where the securities can trade at much higher prices or lower prices than so called fair price calculable from a fundamental analysis of the business. Simba

To: BGR who wrote (68670)	10/6/1999 9:11:00 AM
From: Freedom Fighter	Read Replies (1) \| Respond to of 132070

BGR, I'll make a brief attempt at "my" concept fair value. The books will tell you that "fair value" is the present value of the future free cash that can be taken out of a business over its lifetime discounted at an appropriate interest rate. Personally, I like the concept of replacement cost, business position, and sustainable return on capital. It should give you the same answer but in a less complicated fashion. A business that can be expected to generate rates of return on its invested capital that are appropriate given the "business" risks is worth its replacement cost. Any significant deviation in price or return from that level will tend to encourage or discourage investment and drive the price and returns up or down to their appropriate level. Over time then, replacement cost will approximate the value. I would think that the country as a whole would tend to move towards this level. Unfortunately, the world is not so neat. Replacement costs are hard to estimate and so are business positions. In addition, some companies have superior business models, management, brands, size, or other sustainable advantages. These advantages allow them to generate sustainable excess returns. This goodwill makes them worth more than their replacement cost. Similarly there are companies that possess ill-will instead of good will. But sometimes the prices and fundamentals are so far apart that there is enough of a difference to say that a company is overvalued or undervalued. Wayne

To: BGR who wrote (68670)	10/6/1999 11:23:00 AM
From: Michael Bakunin	Read Replies (1) \| Respond to of 132070

Oh, pshaw. You have so. It should be obvious that even in a perfectly efficient market, there will always be some relative form of value. Under ideal conditions where all information is priced accurately, low multiples would be a proxy for risk, since high prospective returns would only be offered in return for assuming a position that carried high risks. In real life, value reflects the judgement that the market has not struck the perfect balance between risk and reward in a given price. -mb