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To: pgerassi who wrote (5106)	8/15/2000 7:03:29 PM
From: Bilow	Read Replies (1) \| Respond to of 275872

Hi pgerassi; Re stock market valuations (and, therefore AMD and INTC stock prices), as compared to GDP... You noted that countries that are primarily extractive would have different ratios than countries that are primarily information based, like the US. It is not obvious to me why this should be so. A low GDP sort of suggests that the country is not able to turn its assets into cash flow quickly, in some sense. That is, if a mine had a certain amount of gold in it, and it was valued as a collection of gold, the GDP it generated would be the rate at which that gold was being mined, while the market cap would be the value of that gold (after taking into account safety &c.) Since extractive assets tend to have a longer lifetime than informational assets (for example, there are gold mines currently operating that are 100 years old, and oil wells that date to the 30s), I would think that extractive assets would carry a higher market/income than information assets. Modern computer technology, for instance, is totally obsolete in less time than it takes to go through puberty. A more likely reason for the higher market cap (lower GDP) of more advanced countries would be the inherent safety of their advanced legal and financial systems. You have to worry more about Ghana taking your gold mine away from you than Canada, for example. Do you have more thoughts on this? Interesting subject. -- Carl A note: The ratio of Market/GDP is not a pure number. Market cap is in units of dollars, but GDP is in units of dollars per year. The time unit, the year, is implied so we don't think of it too much, but it is there. Consequently, the ratio is in terms of years. This makes it clear that the number is like a P/E ratio, the inverse of an interest rate.