Good Post Mq...
Food for thought...
Until the 1970s, US$ was set by a gold standard. Since then, US$ has been a free-floating bunch of green paper with only Uncle Al between it and Argentinian-style currencies.
And until the '90s, stock prices were set by a profit standard. Since then, tech-dough has been a free-floating bunch of pretty paper, with only goodwill behind it and more mundane currencies.
I have no idea why owning real assets, producing real products, which real people want to buy and pay a pretty penny for, should attract a risk premium compared with a currency made up of borrow-and-hope. When money was gold, and interest rates were paid on borrowed gold, there was good reason to consider high-friction assets like shares to be dodgy and needing higher pay rates.
The owning doesn't attract the risk premium Mq, it's the speculative value of the productivity that attracts the risk premium. Which is to say, one would purchase the enterprise at a DISCOUNT to expected value, thus providing some room for profitability.
And all over the boards you will find folks arguing that folks should pay more per-slice than the enterprise value divided by number of slices. A "premium" to value. And they expect to profit... how?
There was a time when the wealthy pooled their capital and provided it at a discount to value in exchange for ownership rights. The enterprise would benefit by access to the capital it could not otherwise generate, and with this capital, create wealth. Which it distributed to the owners.
Today, the credit-strapped middle class pay someone to pool their capital, and provide it at a premium to value in exchange for fictional ownership rights. The enterprise benefits by being able to distribute compensation to insiders that it could not otherwise afford, and to maintain the semblance of profitability. Which it displays, pro-forma, to the "owners" so that they can recapture wealth by sale of shares to other owners.
Ownership? Ha. Do all you can to reduce the number of stock options being granted to whatever CEO you choose. Or to increase these options, if you think I am setting an unfair standard.
Good luck.
Ownership? Real assets? All showings of all three rings of the greatest show on earth pale in comparison to the lavish set of tents and caravans parked on Wall Street. Now brought to you globally, in cyberspace on wings of CDMA. Now that's innovation, productivity and good old American capitalism!!!
Currencies, such as the Argentinian, the hyperinflation Mark, the Russian rouble double trouble, the Mexican mayhem, and all the rest which have suffered sudden implosion are disasters waiting to happen.
And what about alternative currencies, such as those issued by Qualcomm? Those paid in Pesos or Rubles or Marks are not nearly as bereft of bread-purchasing power over two years as engineers paid in QCOM stock options. Only the latter started higher up the ladder, and so it is harder to weep for them.
Even the mighty US$ is just a promise on a wing and a prayer. What happens if tomorrow I decided, along with umpty million others, to repatriate my hard-earned money and abandon the false profit of the full faith and credit of the Federal Reserve system?
And what do you think happens if tomorrow some pension fund, by itself, or with one or two others, decides to repatriate their hard earned currencies and abandon the false hopes of 3G and pro-forma accounting???
It's a Good Friday today. I was explaining to daughter Emily how Easter is remembrance of the conflict between the individual and universality and human to human contact instead of a Roman Empire state-based dominance hierarchy. I was telling her that humans should interact on a volitional basis, person to person without autocratic controllers getting in the way and confiscating part of the proceeds to use against us. That's why Jesus died on the cross. A constant reminder of the brutality of the state against individuals.
Yes. Although we will have to do with volitional contribution with a cyber-intermediary.
It's ironic that a company like QUALCOMM, with a strong Jewish component, is bringing the freedom and human-to-human realm which Jesus Christ was promulgating, opposed by both the old-style Jewish habits and Roman Empire toga crowd. It's ironic that a die-hard atheist like me has given my life's savings to Dr Jacobs and co, to support the endeavour to bring about the second coming; It - the sentient cyberspace which will bring peace on earth and goodwill to all.
No irony. Just humanity. Thank Goodness!
I do enjoy Easter Eggs.
Me too :)
If I own QUALCOMM, I own assets which are producing very high value for 6 billion people. If there's a financial collapse and the US$ turns to muck instead of brass, CDMA will be relatively unaffected. If CDMA is bought using shares of QUALCOMM [or part shares of QUALCOMM and perhaps a mix of many companies in a QQQ-style index], then why does anyone need a US$ to transact business and store their hard-earned efforts for future consumption?
But you don't. And six billions is an overstatement. If you were posting under the name John Shannon, then would my posts be more optimistic? Probably not. For I would merely have had to choose another pseudonym, and we would merely engage the debate in different guise.
Also, the historical norm involved at a time when lives were nasty, brutish and short. Returns on investment were harder to come by, more likely to be stolen, confiscated by governments or destroyed in war. Even if the assets were safe, life expectancy meant it was better to spend and enjoy today than save and invest for retirement after age 70, which few achieved.
And back then, the same argument was true of prior history. Even today, lives are still nasty, brutish and short. Compared to what we would like. Real returns on investment are still quite hard to come by, more likely to be written off, confiscated by insiders or destroyed in acts of terrorism. And because credit is so pervasive, it's better to spend and enjoy today than save and invest for retirement after age 70, which age many will achieve. Retirement is another matter.
There are other factors too which make the historic norm an irrelevancy. There is no physical constant defining some historic P:E standard to which we must revert. A P:E is a risk-managing guess by millions of people on the probabilities surrounding their lives. There are large differences between now and then.
History is merely a guide. Not a master. But the more things change, the more they remain the same.
There should be no risk premium attached to QUALCOMM and Irwin Jacobs' currency compared with Alan Green$pan's currency.
I'm not 100% sure about that.
When Uncle Al has been pensioned-off and the US$ is a shadow of its former self in global transactions and stores of value, CDMA will be sending encrypted Q-currency whistling through cyberspace for payments, loans, and stores of value. It'll be stored on multiple servers around the world and debited and credited instantaneously.
Sounds like an advert for IBM: robust computing and secure storage. CDMA is merely a bit transport protocol. One of many. Every dollar of licensing revenue they earn 14.1 years from now on, is hostage to the non-zero probability that some non-Qualcomm bright spark doesn't file a key tollgate patent to the wireless bit-transport protocol business. And that no cyberhighway roadway engineers invent bypasses around the Qualcomm tollgates. I imagine the pundits sitting around inventors such as Daguerre and Diesel and Edison and thinking each of the wealth about to accrue to them. Except it never turns out that way. Knowledge diffuses from the point of origin more rapidly than returns accrue to the source.
US$ is a financial black hole waiting to happen. We are approaching the event horizon. Ride CDMA phragmented photons to the multi-dimensional anti-gravity world of cyberspace!
Don't be sucked in!!! [A triple exclamation no less!!!!]
Got gold?
John
P.S. I enjoyed your rant, actually. Offered up the counterpoint in the same spirit of contemplation that it triggered. Happy Easter Mq... |
