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Technology Stocks : Qualcomm Incorporated (QCOM) -- Ignore unavailable to you. Want to Upgrade?

To: Maurice Winn who wrote (110038)	12/30/2001 8:17:39 PM
From: Wyätt Gwyön	Respond to of 152472

Mucho, you basically said the past is how the future will be. One thing we can be sure of, is that that idea is wrong. no, i didn't say that (in fact, this entire discussion originated out of a statement i made suggesting the possibility that the future will be very unlike the past, and the implications of such an eventuality). i said what i said, and i'd rather you address my statements line by line as opposed to arbitrarily and erroneously paraphrasing them (in a way that's easy to knock down) and then knocking down the Straw Man. it is tiresome for me to have to call you on this sort of thing each time, so a little effort on your part would be appreciated if you want to have a discussion. so wrong on the face of it that I won't even bother to dismantle it. If you truly believe this, then there's obviously nothing I can say which would persuade you otherwise, so I won't even try. seems your writing style has improved :) You think fiat currencies are more secure than shares? I thought Argentina had a little glitch in their currency recently unfortunately, your debating style has not improved. you sure seem to like the Straw Man line of attack. want to prove fiat currencies are bad? roll out Argentina, whose currency would be more properly described as a meta-fiat currency. want to prove stocks are good? talk about bill gates. money transactions are orders of magnitude greater than stock transactions. But that is irrelevant to my point no, it is not, because you are trying to argue that stocks as "currency" are somehow supplanting fiat currencies for use by consumers (you even seem to be under the impression that you yourself are a user of stock "currency" because you have a brokerage account with some banking features. maybe you meet cash requirements from a margin account, and consider this some kind of gee-whiz cybercurrency. i must say, i know several people in town who tried to live off margin backed up by Nasdung stocks, and before long they were saying "gee whiz, that was stupid!"). The risk premium belongs on the money, not the sharemarket i believe you have not fully thought through the implications of your statement here (because if you had, i don't think you'd make that statement). the market's assessment of the risk premium for money is reflected in interest rates on bonds. (likewise, stock prices reflect the market's assessment of the risk premium for equities) this does not mean that equity prices will not appreciate faster than the risk-free rate of return; in fact, over the last 76 years they HAVE appreciated faster, to the tune of 7% compounding annually. those "stocks for the long run" charts with the magical 700 basis points are the reason why everybody loves stocks, and a key factor in the current record-high equity allocations recommended by prominent strategists. the REASON equities have appreciated faster than bonds and cash is that historically they have had a RISK PREMIUM. this is another way of saying that equities historically have been priced cheaper than risk-free assets. in exchange for this price discount, equity investors have had to endure greater short-term uncertainty and volatility than lesser-risk instruments. the reward claimed by long-term holders has been the fabled 700 bp. NB this "reward" was not given to investors simply because they passed some magical "LTBH" test; rather, it was the outcome of intrinsic value (Graham's "weighing machine") being illuminated over time and shining through the fog of short-term volatility (the "voting machine"). however, it has been observed recently that equities are now not priced cheaper than risk-free assets; which is to say, their (equities') expected return is no greater than that of risk-free assets. that is what you have to believe if you believe that the risk premium does not (and should not) exist. are you expecting no more than 4% or 5% annual return on your equity holdings over the next decade? what that means is, you expect no more than 4% or 5% return on your equities, AND (since you state that there is no reason for a risk premium) you prefer getting your 4% or 5% return from equities (which are risky, and have no guarantee of delivering this amount [as evidenced by the 20% plunge in S&P 500 operating profits over the past year]) compared to getting the same return from US Treasury bonds (which return is guaranteed by the full faith and credit of the US government, and is likely to be delivered unless the US government ceases to exist [in which case we will all probably have greater problems than choosing what to invest in]). The reason shares can become financial instruments to the extent that they replace fiat currencies is that the transaction costs are going to zero. With cyberspace, transactions can be secure, instant, guaranteed, immune to robbery and lots of other good things. heck, i'm all for the convenience of electronic transactions, but i see no evidence that they will take place in any medium other than fiat currencies anytime soon. perhaps fiat currencies will be replaced by the gold standard (i doubt it, and that is not even an argument made by many gold bulls [i digress]), but using certain stocks in the Nasdung as a basis for a consumer currency to buy your coke or pepsi seems to me highly unlikely.