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Strategies & Market Trends : Booms, Busts, and Recoveries -- Ignore unavailable to you. Want to Upgrade?

To: Jacob Snyder who wrote (73592)	5/19/2010 10:11:41 PM
From: Night Trader	Respond to of 74559

Strangely enough the equilibrium or average value of Q is not in fact 1 but less, something around 0.63. He thinks this is because depreciation is understated. But....what about intellectual property, copyrights and patents, which are the basis of profitability for drug companies and many tech companies? How would you count the drug candidates in early stage trials, which represent the (potential) future income stream of a drug company? The question of intangible assets is what everyone brings up with Q and Smithers deals with it in both books. The idea is a company can only have brand value if other companies have "anti brand value" that is a soda bottling plant is worth less than replacement cost because it's competing with the KO and PEP names. His reasoning for other IP though was less convincing and it's not clear to me why any negative value would be captured by stock indexes or even any public company. OTOH Q does track Shiller's CAPE (cyclically adjusted long term PE) quite closely which gives credence to both.