'Long term expectation' is just another name for 'guesswork'. How can any sane person have a 'long term expectation' in an industry as fluid and changing as technology? What an utterly fatuous notion.

The stock market works with 'long term expectations' because the people who make those predictions don't bear the consequences of getting them wrong, nor do the people who listen to them. On the one hand you've got the people running the companies, who know the ins and outs, who see the sales and profit levels each day, who know what products are about to be launched and are in the R&D chain. On the other hand, you've got a bunch of people who basically stick their finger.. well, somewhere and come up with a number. The stock market - by your admission - bases it's value for companies on the word of the latter over the word of the former. And whether right or wrong, the latter still get paid. That doesn't strike me as anything other than dysfunctional.

A bunch of children in ivory towers making guesses that some try to convince the rest of us are magic spells. I'm sick to death of the veneration of people who continue to perform their jobs appallingly by any yardstick other than the ones they define themselves. You may wish to continue to believe that illusion but I don't.

The manipulation, should it actually have happened,would be a further example of the point. If true, Apple's stock price changed not because of anything Apple did (or did not) do or in fact ever may do. No sale of good changed that price, no Apple management decision or product launch, no announcement of a future product. Simply that a stock broker made a bet and then decided to try to fix things so that bet came off. Should it have actually happened (and I merely said there was a chain of events that meant it *could* have happened, not that it did, because I have conclusive proof to say so) it would convince any rational person to run screaming from any form of investment that involves the stock market, because the stock market is therefore not 'sane' in any viable sense.

Jon

You keep proving time and time again that you don’t understand the basic mechanics and don't know the fundamental definitions so there is not point in trying to persuade you.
Though it's funny how you always have something to say on these topics...

Good, stop then.


You have noticed what this is, yes?

I think that iPads will be an easier sell because you do not need to tie yourself into a long contract. My iPad is wifi only and I do not see the need for a 3G or 4G version when I can tether it to my iPhone. Plus I only really need one iPhone but could find uses for numerous iPads around the home. I am planning in eventually putting one in every room and using them as needed. If I take my iPad into the kitchen I have a stand to put it on so I can stream TV while I am washing up or cooking. It becomes my portable media centre. So while the phone can be sold to everyone, you only need one or two. With the iPad you could have far more. Though I think that many households will have one per person and as they get older they will get smart phones.

To be honest, I think the market will saturate quite soon. Once practically every home has one with a retina display, how many will really want to upgrade to get a slightly faster one with slightly more memory? Although some people will always want the latest model, for the majority they're good enough already - unless some new must-have application demands more power.

I think the main growth area to sell to now is children. That will require a drop in cost.

Fatuous or not, the whole concept of investment demands it. The fluidity accounts rather will for wild swings in the prices of tech stocks.

You'll note that by and large tractor manufacturers tend not to have the highs and lows that you see with companies like Apple, Cisco, Nortel, RIM and many others. This is because predicting their future performance is less difficult/exciting.

My issue is that just because 'this system does this thing' doesn't mean the system isn't broken - we should ask 'is the thing it does what we want it to do'. We should examine any system to ensure it is performing as intended, not merely if it looks like it's doing 'something', which may or may not actually be useful. Even a system as vast and complicated as a stock market should not be an end unto itself, it should perform some function within society.


The question is (and this applies to any stock, be it a chip maker, a tractor maker or a candlestick maker) - do the fluctuations in the stock price correlate to the performance of the company in question? If so, fine. If not, then what is the value of the stock actually based on? Is it still the company it ostensibly represents, or is it some other thing? And if it is 'some other thing', how are we to assess the accuracy of it's value?

I do agree children could be a big market but you forget about the other commercial uses, such as within schools, and hotels. There are restaurants who now use iPads for ordering. Top hotels have them in the room for customer services so that customers can order room services and change settings on the air conditioning or book alarm calls, and even pay the bill. Airlines are using them for carrying maps and charts, as they are a lot lighter than paper charts. The start of the commercial uses has only just started. So while many could cope with just one they are replacing ultrabooks and netbooks.

Perhaps you should start by deciding what you think the system is for. An economist would tell you it brings investors together to allow the formation of companies and provide liquidity. In other words, it's an investment, and like any other it's there to match investors to borrowers.


The price of a share, like the price of a cow, gold, or any other commodity or equity is based on expectation of its future value. There isn't a "proper" price for anything in the world, and there never could be. So it's a mistake to suppose that the priority issue is to fix the price setting mechanism. No mechanism you could possibly devise would be correct.

That's the 'book' definition, certainly. And probably what it should be for. I'm not entirely sure that's the current reality though. I'm not convinced the stock market is still about 'investing in companies to provide liquidity' as much as 'generating profit from trading as an entirely enclosed process'.


The price of many commodities/goods is based primarily on their current value not their future value because they are bought to be used and therefore will have no future value. Any item is only an investment when it is bought with the intention of later trading, at which point it's future value becomes relevant. To whit - I may buy a gold ring. If I buy that gold ring expecting to sell it later, it's an investment. if I buy it to wear, it's a piece of jewellery. The collapse to view everything as an investment, ignoring it's current value in favour of a nebulous notion of 'future value' which may or may not be accurate is one of the things that got us in the financial mess we're currently 'enjoying'.

And anyway we're back to the same question - whose expectation? Why is the expectation of someone with incomplete information with, in quite a lot of cases, in fact a pretty choppy record of accuracy seen to be more appropriate to base the price on than the estimation of someone intimately familiar with the company in question who has a much better chance of getting it right and in fact has a legal imperative to generate accurate information?


On the contrary, everything has a proper price. That price is what somebody will pay you for it right now. The idea that what someone might pay you for it at some indeterminate point in the future is more important than that is one of the things.. well, I wouldn't say it needs fixing per se, what I think needs fixing is basing a significant chunk of your economy on it.

The company raises money by selling off equity to people whose purchase of said equity makes them part owners of the enterprise. The equity continues to exist and is traded. People own stuff, they sell it to other people. What's this foolishness about closed processes supposed to mean?

I assumed it went without saying that if you buy a cow with the intention of eating it, then its future value is consumed with the product. Conversely, anyone who makes investment decisions based solely on current value is an idiot who deserves to die in poverty.

The person who is investing the money has an expectation of a return. There is risk, and because of this, there is equity risk premium.

On the contrary, everything has a proper price. That price is what somebody will pay you for it right now. The idea that what someone might pay you for it at some indeterminate point in the future is more important than that is one of the things.. well, I wouldn't say it needs fixing per se, what I think needs fixing is basing a significant chunk of your economy on it.[/quote]
What the guy is willing to pay right now, is based on what the same guy thinks the product will be worth in the long run, because it's an investment. He is buying it because he wants to be able to eat food and wear clothes in the future.

Please, for the love of God, the point of investment is future value. Everybody knows that. Why are you arguing with me about this? It's not sane.

I didn't ever say that wasn't the case, in fact I said the opposite (that a consideration of future value is what makes a transaction an investment). But, y'know, if it makes you more comfortable to dismiss me as insane, go ahead. I think I can cope with it.

Progress. You now agree with me and Koli and have seen the error of your ways. Shares are investments, their prices absolutely should be based on expectations of future value. Everybody's happy now. And apparently is was sheer misinterpretation to suppose you said exactly the opposite just because of a minor technicality to do with the words you used and what they mean.

Once again, you seem to attributing to me things I did not say. I did not say I was insane, I simply said I was able to cope with the notion that you think I am.


A very unlikely proposition.

To be more specific for those who are willing to give it a thought:
Value of a share is equal to present value of future cashflows that the holder is expected to receive.
So basically you figure out what dividends you will receive and you discount them to present.
Discounting is the application of the fact that receiving £100 today is worth less that receiving £100 in a year's time.