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Politics : Formerly About Applied Materials -- Ignore unavailable to you. Want to Upgrade?

To: Gottfried who wrote (27041)	12/8/1998 4:35:00 PM
From: Robert O	Read Replies (1) \| Respond to of 70976

G: Your picture is worth a thousand, uh, units of investment. George Soros has an interesting notion that almost all stock prices are "wrong" especially among the less liquid issues that are less followed. Concept goes like this: Ask what is current stock price based on? Typical answer is expected future "benefits" to company aka net income, or for those who get a little spooked by the GAAP accounting employed by the likes of Sunbeam, net cash flow discounted back to today at some reasonable cost of capital rate or "appropriate" rate based on riskiness of company. George says that's flawed because basing today on the future changes today's condition which in turn changes the future. Have others run across his thinking? I only have this from an abbreviated source, but I'm intrigued by this concept since it attempts to get at our current thread's dilemma of explaining price versus "company." One immediate example I can think of is a huge benefit if a positive (or overly positive!) future is predicted, current market cap will bulge, thus allowing for easier access to additional funds through borrowing or issuance of add'l equity. His idea seems to be we're caught in a reflexive type loop. Well, like most who are familiar with Soros, you either find this profound or asinine/unimportant. Personally I think he's bucking for a Nobel Prize via the Nostradomus approach (theories are so broad or complex that viewed in hindsight something will appear prescient) that won't be coming in his lifetime, or for that matter posthumously. RO