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Strategies & Market Trends : Graham and Doddsville -- Value Investing In The New Era -- Ignore unavailable to you. Want to Upgrade?

To: porcupine --''''> who wrote (247)	4/23/1998 4:37:00 PM
From: Daniel Chisholm	Respond to of 1722

<<In that which is most important (food, clothing, transportation, etc.) consumers have an advantage over owners -- not such a bad thing when looked at that way.>> I agree. As a consumer it is nice to have such advantages. Isn't it odd though, that for those things which I absolutely need and simply cannot live without, somehow "the system" offers me these goods at hardly more than their cost of production? Better stated, the manufacturers of these goods are not getting rich on their capital invested. (Can't forget cost components such as taxes and regulatory costs which raise the price the consumer pays, without contributing to the business owner's returns). I've never understood why falling prices for food, oil, metals, etc was such a disaster for the world at large. Efficiently providing for basic needs sure looks like a good thing to me. Faster, cheaper, better and all that. I wrote: << And industries that manufacture products I use, enjoy and respect, but which I could very well live the rest of my life without (Coca Cola syrup, Gillette brand razor blades),... >> To which porc replied: <<The producers of these have the edge. But, note, we're not talking "pet rocks" here. Caffeine keeps a lot of us going through the day. And, many of us need to shave daily to be acceptable to "civilization as we know it." >> I was talking specifically about the Coca Cola brand and the Gillette brand. Were Coke and Gillette to disappear from the face of the earth tomorrow, $250 billion of market cap wiped clean away, it would reduce my quality of life in only the most infinitesmal of ways. Life would be still be worth living with generic brand cola and razors. (Though Berkshire Hathaway shareholders may not be so sanguine... ;-) These two companies have a market cap of about 4% of US GDP, and most of the value of that market cap is attributable to the value of their brands (I think). Yet it seems (in thought experiment mode here...) that the loss of their very great intangible wealth could be much more easily weathered by the world at large than a loss of a corresponding amount of tangible assets (wheat, steel, oil, etc) Strange, isn't it, how the "trivial things" that don't really matter in the scheme of things, seem to produce the highest returns on invested capital. So is the path to investment success to find something that everyone thinks they really need (though in fact they don't need it at all), that has certain intangible properties that cannot be copied by any potential competitors, and does not require much capital to produce? (a "sneed" from Dr. Seuss's The Lorax comes to mind here - except sneeds were quite capital intensive in manufacture - improperly accrued depreciation charges). Seems like thinking this way too long could really disillusion a fellow... - Daniel