Re: Sustainable Stock Prices

["Harry Veeder" <veed0001@xxxxxxxxxxxxxxxx>]

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>From: "John Gelles" <jjgelles@xxxxxxxx>
>To: POST-KEYNESIAN THOUGHT <pkt@xxxxxxxxxxxxxxxx>
>Subject: Sustainable Stock Prices
>Date: Sat, Apr 8, 2000, 1:07 pm
>

>            If share price and aggregate capital value of firms
>            is always a function of subjective judgement by
>            the last willing buyer, on what is that judgement
>            mostly based?  Estimates of future PRICE,
>            EARNINGS, DIVIDENDS, the ECONOMY,
>            INDUSTRY  and FIRM.
>
>            Yet the contrarian can fight the tape, and win, if
>            he guesses right -- on where the bubbles are and
>            when they will burst. The problem is when you sell
>            short, you are fighting the upside.  Downside risk
>            is certain. Upside risk is unlimited.  So only a very
>            few of us will risk getting rich on bursting bubbles.
<snip>


John, raises an interesting point. It is interesting because
I think it involves an incorrect assumption about nature of bubbles.
I believe the nature of bubbles reflects "subjective" inflated
estimates of PRESENT VALUE rather than future earnings.

Harry Veeder