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Technology Stocks : Wind River going up, up, up! -- Ignore unavailable to you. Want to Upgrade?

To: Anthony Ettipio who wrote (8034)	6/29/2000 3:24:00 PM
From: Don Lloyd	Respond to of 10309

Anthony - [[...How should we best analyze these recent actions by insiders??...]] By ignoring them. You must realize that the primary economic purpose of the stock market is to facilitate the sale of shares by insiders, broadly defined. The existence of the organized market for shares is what greatly improves the risk/reward ratio of initial private investments and encourages the taking of those risks. Just because an insider is willing to sell you some of his shares at a given price, that doesn't mean that you are necessarily paying too high a price. There is no such thing as an intrinsic value for any economic (i.e. non-free) good. All economic goods are subject to the subjective theory of value, and the law of diminishing marginal utility as well. All voluntary exchanges are made between two parties, each of whom believes that he will be better off afterwards, from his own point of view. In all cases, each party will give up an amount of one good that he judges has a lower subjective marginal utility than that of the amount of the good which he receives. The more you have of a good, the less value you will assign to an absolute amount of it that is smaller than the whole. In the case of stock, the insiders and venture capitalists will usually have a relatively large number of shares, (as well as the likelihood of receiving more in the future), and will therefore assign them a lower marginal utility than that of the amount of money that they may bring in on a sale on almost any given day. The retail buyer is in the opposite situation, with cash and no shares. He will spend down his cash by buying shares until the marginal utilities of both cash and shares roughly match, and also match the marginal utilities of all the other goods which could alternately be purchased or sold. To repeat, this is true of all economic goods, whether shares or ham sandwiches. While sandwiches derive their value from their use as food and contribute to survival, shares are valued by a reasoned (hopefully) expectation that an uncertain future will at some point allow the shares to be exchanged to a third party for a sufficiently larger amount of cash, possibly supplemented by dividends along the way. Regards, Don