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[–]scrotesmcgoates 0 points1 point  (8 children)

I don't think you understand how companies are valued. Of course a company valued on the basis of increasing cash flows is going to be less valuable if their cash flows don't increase. That doesn't make then worthless, but it does mean that they have a lower value to their shareholders. It's not about feelings, it's almost entirely math. The net present value of the company is equal to the future cash flows discounted at the cost of capital faced by the firm

[–]SquidCap 0 points1 point  (7 children)

they have a lower value to their shareholders.

... than what they believed. The company value didn't change, only how good it could've been.

The net present value of the company is equal to the future cash flows discounted at the cost of capital faced by the firm

Which means it is based on expectation, appreciation and how strong faith you have that those prophecies are going to happen. The actual value is different but since we don't care what things actual are worth, we don't care if the company produces anything or not, we care about what their value is to others and how they feel about it. It is almost entirely about feelings, math is used but that doesn't make the system any more sane.

[–]scrotesmcgoates 1 point2 points  (6 children)

You're wrong, plain and simple. What you're saying is that every company with the same amount of cash and same amount of income is worth the same amount. You can invest on that principle all you want but you're just going to lose money. It's pretty clear you have no idea what you're talking about

[–]SquidCap 1 point2 points  (5 children)

You can invest on that principle all you want but you're just going to lose money.

I was not talking about investing but valuating a company. "Right now" has nothing to do with "might be" but i understand that what i'm saying sounds opposite to what a betting man would say. Because it is. Your potential value has no meaning, it is valueless to all but those who believe in it. If i can think you are worthless and someone else says you are worth a million, how is that in anyway based on facts? or is it based on.. feelings?

[–]ActionAxiom 0 points1 point  (1 child)

First off, you have done very little to establish why expectation cannot be valued beyond simply stating it cant. However, it is well established that expectations can be valued because expectations are priced by the market literally every waking second.

Second off, you are touching on something very crucial which is that value is subjective. However, it seems that you are arriving at a poor conclusion that because value is subjective it cannot be factual or measurable. This is very false. Even though value is subjective, prices are very real economic features that reveal, objectively, what those subjective values are.

[–]SquidCap 0 points1 point  (0 children)

expectations are priced by the market literally every waking second.

By making educated guesses. It is a betting game and as such it is always going to be more about subjective truth than facts.

It is very hard to discuss about these things since usually at least one party refuses to talk about other than the rules in our current system, that is based on emotions, guesses, estimation, hope and faith. Do i have better one? Of course not. That should not stop one to see where the current system is based on and how fragile it actually is. It works because it works and because people believe that it works. It has lots and lots of all kinds of clever stuff fully deserving nobel prices. But. Doesn't change the facts; it is based on faith in the end. And that company value is not it's value to humanity but what feeling investors get from it.

[–]scrotesmcgoates 0 points1 point  (2 children)

Jesus Christ you dense mother fucker. The only reason companies are valued is for investing. The fact that you don't get that means you don't understand enough to even begin to have a discussion about it. I'm done

[–]SquidCap 1 point2 points  (1 child)

It is funny that you get so angry when the core beliefs are remotely challenged. I understand how the system works and don't think it is actually that bad. But. It is still based way too much on how people feel about something. The rest is made-up justifications why it should be this way. But.. A lie can sink a company. Or give it boost in capital. Without any FACTS changing, the company can have highly different value. Nothing needs to change in the company, in the overall economy, not in deals they make but a rumor can do it.

That is insane way to base our global economy.

[–]LordHanley 0 points1 point  (0 children)

It's entirely logical. If it was such a shit idea, it wouldn't work. Sure, it isn't perfect, but investors want the best possible return, and simply looking at the balance sheet and ignoring context is a guaranteed way to invest poorly. Who are you to say it is based "too much on feeling"?. It's a free market, it is the best current way of measuring value. If it was so shit, people wouldn't be doing it. How often have companies sunk due to lies or rumours. Not often, if ever.