Silicon Investor (SI) -- The First Internet Community

STOCKTALK

We've detected that you're using an ad content blocking browser plug-in or feature. Ads provide a critical source of revenue to the continued operation of Silicon Investor. We ask that you disable ad blocking while on Silicon Investor in the best interests of our community. If you are not using an ad blocker but are still receiving this message, make sure your browser's tracking protection is set to the 'standard' level.

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

To: bull_derrick who wrote (22924)	3/15/2005 11:21:51 AM
From: kodiak_bull	Respond to of 23153

Derrick, As I read your response to WP, I thought about studying financial models decades ago. It occurred to me the timeless wisdom of the phrase: "In theory, there is no difference between theory and practice; in practice, there is." I believe the many theories of valuation (net asset value, discounted cash flow value, capital asset pricing model, Black Scholes, etc.) would be excellent traders' tools if only we could trade theoretical dollars instead of real ones, and if those who composed the market were all theoretical investors instead of real ones. I have taken the liberty of reducing your response to its essence: "in terms of a pure financial model . . . they taught us . . . the stock price should be theoretically equal to the net present value of all future cash flows." "pure should be theoretically " True story: I once met someone who didn't play tennis, but watched a lot of tennis on tv. He told me he had a theory that the players were playing it all wrong, that he wanted to concentrate on learning to play tennis in a different, more effective way. I can't remember all of his theories about it, but one of his conclusions was that many tennis players spent way too much time running around the court, chasing tennis balls. He thought it would be more effective to simply let a good number of shots go, and focus on the high percentage shots like smashes at the net and clean winners. I have to admit, for a moment, in theory, it almost made a tiny bit of sense. Another question of theory vs. practice: why do we have not only war colleges but war games? If we could solve issues with multiple variables and human emotional responses (reminds me of markets) with thought and bits 'n bytes, why have all those guys crawling through the muck with paintball bullets, etc.? Kb