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Strategies & Market Trends : Value Investing -- Ignore unavailable to you. Want to Upgrade?

To: E_K_S who wrote (42985)	6/12/2011 1:33:08 AM
From: Jurgis Bekepuris	Respond to of 78748

It depends on what you call "simple DCF model". I never use the treasury rate as discount in DCF. For me the discount rate is the rate that I want to get from the investment. I don't care whether I have an alternative at that rate, it's the lowest expected rate at which I would buy an investment. So for me discount rate is almost always 15%. IMHO the chart you show is much more spread out and ambiguous than you (and the other author) try to present. IMHO, you guys are making way too strong assumptions on what would happen in different inflation and deflation scenarios. Future is likely to be quite unpredictable. Now, you are right that interest rates may swing around in coming years. This just provides opportunity for investors who don't care about short term volatility. Obviously if people don't have strong understanding of DCF and discount rate role in it, they can use it in various ways to justify ridiculous pricing for stocks - most on the time suggesting buying too high.