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Strategies & Market Trends : Roger's 1998 Short Picks -- Ignore unavailable to you. Want to Upgrade?

To: Oeconomicus who wrote (17793)	3/19/1999 4:06:00 PM
From: Roger A. Babb	Read Replies (2) \| Respond to of 18691

Bob, he will probably make a few million on the book.........

To: Oeconomicus who wrote (17793)	3/19/1999 6:19:00 PM
From: BelowTheCrowd	Read Replies (2) \| Respond to of 18691

At the risk of sounding Cramer-esque... > What kind of ego does it take to say that everyone else in the US markets have been wrong for the last 100+ years and that his valuation is the correct one? < There are a lot of people who are questioning a lot of assumptions that have been taken for granted for the last 100 (or more) years. Not because they were wrong, but because they were right only for a set of conditions which are rapidly disappearing. For example, when I was in business school lots of discussion went into valuing companies on book value, which is highly dependent on physical assets. Makes a good deal of sense for an industrial-era manufacturer whose value is largely represented by the value of their manufacturing base. How would you apply that kind of valuation to a modern software company? If they account for things conservatively, there might be almost no long-term assets at all. Book value could be meaningless. Even a modern manufacturer probably has significantly lower "book value" than it would have in the past due to outsourcing, just-in-time inventories, just-in-time sales and all the other efficiencies that are inherent in an information economy. The relationship between bonds and stocks could be analyzed similarly. Bonds could be thought of as "safe" because they would be pledged against the value of the company, which was presumably rooted in physical assets which -- at the worst -- could be sold to pay off the bondholders. Stocks were riskier, because they depended much more on earnings. That kind of distinction is getting increasingly fuzzy these days, as assets become harder to quantify and increasingly volatile. That said, I think 36,000 sounds a bit ridiculous. But it's also clear to me that the transition to an information-based economy has only begun to have an impact on the critical assumptions we make about a very many things. mg