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Politics : Formerly About Applied Materials -- Ignore unavailable to you. Want to Upgrade?

To: kdavy who wrote (46911)	5/17/2001 12:50:10 PM
From: Charles Tutt	Read Replies (1) \| Respond to of 70976

I don't think intrinsic value is any less useful than technical analysis. JMHO. Charles Tutt (TM)

To: kdavy who wrote (46911)	5/18/2001 12:59:19 AM
From: Sam Citron	Read Replies (3) \| Respond to of 70976

Discourse on value, etc. "Would I get in trouble for saying " Intrinsic value of a stock is more of an academic exercise than a useful or practical tool" Many value-oriented investors do care about intrinsic value, but such models are only useful for believers. For others they may represent garbage-in, garbage-out. It's all a matter of trying to model relationships that are significant to your own given strategy, rather than someone else's view of the universe. For example, as an active covered call writer, you might want to ask yourself what factors are relevant to determining whether a given option is cheap or dear, and how you might go about determining the option's intrinsic value. That, of course is just what Mssrs. Black and Scholes did and they based their formula primarily on volatility and interest rates. Such measurements, to the extent they help us depict reality, or generate trading profits, certainly become more useful than mere academic exercises. But there are rarely any Holy Grails. Some prophesies may be self-fulfilling, but most will only be simplistic models of a much more complex reality. I personally do not attempt to pretend that I can distill the value of a given stock into an exact amount. It's more like the Supreme Court justice who said that pornography can't be precisely defined but he knows it when he sees it. Instead of applying precise objective definitions, courts today simply define it as what is objectionable to the standards of the community. Similarly value eludes precise definition even for many who call themselves value investors. It may be all in the eye of the beholder or in what the market will bear at a given moment in time. As JM Keynes said, in the stock market you can forget about who you happen to think is the prettiest girl. What counts is who the other judges think is the prettiest girl. If you consider how difficult it is to determine even the intrinsic value of a loaf of bread, you will see that it is very difficult indeed to do so for an entire company with any degree of confidence. Therefore, it is often useful to discover value relative to the prices we observe of other things. We usually have a better sense of whether something is cheap or dear than what it is truly worth in an absolute sense, if indeed there is any substance to an objective notion of value at all in a relativistic universe.