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.

Strategies & Market Trends : Bear! -- Ignore unavailable to you. Want to Upgrade?

To: White Shoes who wrote (76)	5/19/1998 12:44:00 AM
From: Michael Burry	Read Replies (1) \| Respond to of 271

White Shoes, Good to hear from you again. Re: Coke as a bond, I've heard this argument from many a bull who wishes that this market will bear fruit forever. You can take any stock and figure that it's earnings yield is the coupon on a bond, and then expand that coupon yearly by the earnings growth, and then take it into perpetuity and then say hey look at this massive amount - stocks are still undervalued! But to get the present value you have to have a discount rate, which is a function of the risk you are taking as well as the return you are demanding on your investment. This discount rate is subject to all kinds of manipulation which basically means that I don't trust anyone who makes this argument unless it's me. Largely, I believe they will underestimate the risk when dealing with perpetuity in equities. Hence the discount rate will be smaller than it should be and hence the present value will be larger than it should be. The worst offenders will pretend they are Buffett and eliminate the risk adjustment to the discount rate altogether! I'm really tired and I'm not willing to proofread what I just wrote, but I hope it makes some sense, but to sum it up I do believe this analyst should be smoking something. Mike