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To: Craig M. Newmark who wrote (38431)	10/30/1997 4:48:00 PM
From: Jim McMannis	Read Replies (1) \| Respond to of 186894

Craig, I applaude you. Nice to see someone identify themself with their real name and profession. JIm

To: Craig M. Newmark who wrote (38431)	10/30/1997 6:25:00 PM
From: Reginald Middleton	Respond to of 186894

<Mr. Middleton's techniques are probably very useful tools for corporate managers, in much the same way that study of marketing and accounting are. But they will not let an investor do systematically better than the market.> Naturally, I will disagree with this statement. You actually worded it correctly, economic profit driven valuations will "let" an investor do systematically better than the market. "Let" is the key word. Without the proper education (not necessarily academic) and observations, not tool will serve you properly. As the adage goes, garbage in = garbage out. <Mr. Middleton replies that the "average" investor does not know about his techniques and may use silly techniques to pick stocks. Very true but quite irrelevant. The stock price is not determined by what the "average" investor knows or doesn't know. As long as there are some very well-informed investors--and believe me there are--prices will be driven to levels that reflect what they know and believe.> This is a misleading statement. Let's take Netscape as an example. As I quoted form you above, NSCP share prices were bid up to astronomic prices, both by those who were well informed and those that were not so well informed. These prices were totally out of line with the intrinsic, and discounted value of probable cash flows to be exected from NSCP. Although well informed investors may have had money in NSCP, they quite possibly had it in for reasons other then long term investment. If one had a worthwhile empirical method of valuing NSCP's shares and cashflows, one would not have participated in the party of company sporting a P/EBITDA (price to earnings before interest, taxes, depreciation, and amortization) in excess of 300 (especially given thier competitive environ). <The only method to consistently superior investment performance, assuming you don't possess inside information, is to have a different and more accurate forecast than the market's of the future. Mr. Middleton's numbers reflect what has happened in the past; unless he can forecast more accurately his method will yield no special insight or special result as far as investing goes.> I don't mean to be caustic, but that was a VERY irresponsible statement, not to mention totally inaccurate. The least you could have done was look at the material before you commented on it. The crux of what you consider to be "my" method's are highly specialized economic profit models, of which I supplied links to. Valuation results from the discounting of said risk adjusted cash flows and/or capitalization of (forecasted) economic profits (actual value). Please review again or ask me directly. I do invite further debate on this topic though. RCM