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

To: Freedom Fighter who wrote (1354)	2/25/1999 7:44:00 PM
From: Freedom Fighter	Read Replies (1) \| Respond to of 1722

Porc, When I provided the link to "Money for Nothing, an article written by an Austrian economist, it was because I found the alternative view interesting and with some merit. I thought others that visit GADR might enjoy it also. I did not want to have a discussion about another man's view of something that has nothing to do with whether I or anyone else should be investing or not. Value Investing is the primary purpose of this thread as far as I can tell. But in your response to it I think you misrepresented the AS theory and ideas in some respects. So I was forced to either ignore it or get dragged into a discussion I thought was irrelevant and didn't want to have. That's been a problem for me in this thread. In the future I'll just post those links elsewhere. Maybe they don't belong here at all. Wayne

To: Freedom Fighter who wrote (1354)	2/25/1999 8:20:00 PM
From: porcupine --''''>	Read Replies (2) \| Respond to of 1722

Durable goods orders, existing-home sales rise WASHINGTON (WSJ) - Durable-goods orders jumped by an unexpectedly strong 3.9% in January to their highest level on record, powered by an outsized, 15.4%, surge in transportation orders. Excluding demand for transportation goods, factory orders still rose 0.4%, suggesting that the manufacturing sector may be in a rebound as it managed to build on December's impressive, 3.4%, growth. The signs of manufacturing strength were joined Thursday by strong housing data, as the National Association of Realtors said sales of existing single-family homes in the U.S. rose 0.8% in January to a record seasonally adjusted annual rate of 5.07 million.

To: Freedom Fighter who wrote (1354)	2/25/1999 9:55:00 PM
From: porcupine --''''>	Read Replies (1) \| Respond to of 1722

"My problem is that I don't think the term extremist is suitable." But, it is; and it's troubling that you cannot see the obvious. Advocacy of extreme change is by definition extremism. But, this is just the begiining. Everything about the AS shouts out "Extremism!". "I think they have a lot to bring to the table .... " I have already written in 3 postings that I agree that they have interesting and probably important insights. This makes 4 times. At some point I will get around to elaborating. " ....and they are kept out the mainstream discussion not because of what they have to say and its merit, but because their beliefs and desires, if implemented, would require an overhaul of the current establishment. Naturally then, they are attacked as extreme so it won't be done." The status quo always opposes change, because change is always inconvenient. So, they always attack advocates of change. But the specific charge that is made, however exaggerated, stems from the nature of the proposed reforms themselves. If they are extremely different from the status quo, they're called "extreme." "The minority that benefits under the current system is protecting itself." But, Wayne, that's true of everybody. That has no bearing on the merits of a given proposal for change. "An overhaul of the system is not extreme if it can intellectually and economically be shown that we would be better off by it." It's extreme if it advocates extreme change, whether for good or ill. "The attack of extreme prevents the discussion that could lead a majority of people to form the same view. It would then be mainstream. I know I, my family, and all my friends would be better off if we trashed the current system in favor of a version of what they advocate." "Trashing the current system" is the essence of extreme. And, you cannnot possibly know you will be better off until it's tried. This kind of a priori certainty, that is, again, a hallmark of extreme views. Plus, you have a lot of history going against you. I cannot think of a single example in human history of extreme change not leading to widescale tragedy. "You are lumping them together with people who we would both agree are lunatics." I'll say it again: Lunatics can have interesting and useful insights. But, I don't want them in charge of things, or their proposals widely adopted. >>"Economics is a subject that has only marginal value in "value investing" other than to perhaps understand why an economy is performing the way it is in the 'short term'."<< >I must be misunderstanding your point here. As you know, Graham's undertaking was to employ economic principles to acertain the economic value of a company, and buy when its per share market price was safely lower. Buffett perfected the process. That's why Janet Lowe quoted some notable (I wish I could remember his name), who declared "Value Investing is applied economics".< "When I speak of economics, I am generally talking about shorter term projections of inflation, economic growth, interest rates etc... I believe these are of little importance in estimating the intrinsic value of a business by most standards of that measurement. Intrinsic value i[s] generally defined as the present value of all the cash that can be removed from the asset over its lifetime. So we are talking a decade(s). Thus discussions of the sort that are related to the current or next year's economic activity should be of little relevance to a long term investor's estimate of value. I try to avoid those discussions because they mean nothing to me when I invest. I'm not going to get anything out of it and believe other readers would be better not thinking about those things either." Well, that's a rather narrow definition of "economics". But, it is what Peter Lynch meant when you quoted him as saying that more than 10 minutes a year spent thinking about economics is a waste of time. As I understand the context in which that statement was made, he was referring to using macroeconomics in an attempt to time the Dow. But, the question that you had brushed aside by quoting Lynch was whether production generates enough in incomes to clear the Market of what is produced. That's not about short term timing. That's about whether boom/bust is inherent to the system. If production doesn't generate enough in incomes to clear the Market, then the only way to make up the difference is to lend the money -- and this must inevitably collapse, even if gold dubloons were the one and only medium of exchange. >>"So it's really not worthy of a long discussion."<< >New readers: Welcome to Wayne's World <g>. Wayne, you have repeatedly put the economic ideas of the AS into play. Yet, when I raise economic issues (e.g., does the production process generate enough income to clear the market of what is produced?), you dismiss economics as having little relevance. But, economic analysis is what distinguishes Value Investing from contrarianism for the sake of contrarianism (buying a security solely because its price has gone down is no more necessarily rational than buying solely ecause it has gone up.< "I have addressed those issues that I think that I have an insight into lots of times. I don't like to repeat. Especially when I think the discussion has nothing to do with whether anyone should be buying a business they are looking at. "I have generally put forth the ideas of the AS as a way of giving people a chance to get an alternative view on what is going on in the economy now or has gone on in the past. It's just information. I don't think any of it has anything to do with the values. Again, the values have to do with the present value of future cash over the long term. To me that is not really economics in the way I use that term (as described above). Hmmm. >However, I disagree that Japan has had 10 years of hell. On the contrary, the general population has hardly felt the problem, which is the major reason the political will does not yet exist for change. "Hell" is when the government does nothing while panic degenerates into economic and political chaos.< "I figure that suicides, widespread bankruptcies, and losing a significant part of your net worth in real estate and stocks that are down 50%-80% after ten years is my definition of hell." What I have been reading is that the Liberal Party is still in power, and still afraid to take really decisive action, because most of the Japanese electorate is still not feeling the pain. "To me understanding and money is already enough merit." You still haven't explained that one --'''':>