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Politics : High Tolerance Plasticity -- Ignore unavailable to you. Want to Upgrade?

To: whitepine who wrote (22921)	3/14/2005 1:12:12 PM
From: kodiak_bull	Read Replies (2) \| Respond to of 23153

WP, How on God's green earth will "knowing" something you call root base, fundamental "value" help you make money? If you can determine that, with 99% accuracy, laying up a golf ball to the side of a water hazard so you can 3 stroke around it to the green will "guarantee" you that you won't lose a ball (and suffer a lost ball and a lost ball penalty) will that make you score better as a golfer? Maybe you are supposed to lose 1 ball out of 10 by aiming over the water hazard to get to the green in one or two strokes, rather than the safe 5 strokes? RISK is not determined by how do I avoid losing a single penny 99% of the time, RISK is determined by how do I optimize by reward:risk ratio so that, over time, my gains outweigh my risks by a healthy factor. In golf again, expect to lose 10 balls in water hazards over a season's golf if you want to shoot in the low 80s. They're just golf balls, after all. If you never lose a golf ball you are destined to shoot 112, 108, 116 . . . And that ain't the way to play golf. Kb

To: whitepine who wrote (22921)	3/14/2005 3:27:39 PM
From: bull_derrick	Read Replies (1) \| Respond to of 23153

wp, in terms of a pure financial model, what they taught us in Finance class in business school was that the stock price should be theoretically equal to the net present value of all future cash flows. This simple statement has some basic flaws in that it would predict that a company with negative cash flows would be worth zero yet plenty of startups consume cash at least initially so the market has to put some guessing into what future cash flows will be a few years out. Also net present value changes greatly depending on what inflation rate deflator one puts on things but this does answer the question why when rates go up (and eventually bond yields become attractive), that stock prices begin to wither beyond a certain point.