Value is in the eyes of the shareholder
January 7th 2008 11:09
Sharemarkets worldwide today plunged on the fear of a possible recession in the US based on negative employment data.
The Australian ASX S&P 200 benchmark index fell by 2% welcoming the year of 2008 as normalcy returns. Is this the long awaited 'real' correction? Time will tell.
Taking the event as an opportunity to find out what is in store for 2008 or at least the expectations, many believe this year will be a slow one for the market due to excessive over valuation carried over from last year.
For some, it is getting back to the basics and fundamentals again. To be precise, is all about 'accounting'.
"The value of a company … is equal to what it costs to replace the company, in other words, the nuts and the bolts and the machinery," he said. "If you look at the replacement cost and the market cap in the United States, it shows that the market cap is something like 30% above the cost of replacing the capital", said Monash University economics professor Jakob Madsen.
However we know that the market does not act like a linear equation. Valuation of exchange-traded equities can sometimes be very subjective as after all, men are not programmed to trade like a computer program. There are many factors working at the same time affecting one's decision.
For the initiated, it is very much like a Butterfly Effect: 'sensitive dependence on initial conditions'
Yes, it is chaotic. Are you ready?
The Australian ASX S&P 200 benchmark index fell by 2% welcoming the year of 2008 as normalcy returns. Is this the long awaited 'real' correction? Time will tell.
Taking the event as an opportunity to find out what is in store for 2008 or at least the expectations, many believe this year will be a slow one for the market due to excessive over valuation carried over from last year.
For some, it is getting back to the basics and fundamentals again. To be precise, is all about 'accounting'.
"The value of a company … is equal to what it costs to replace the company, in other words, the nuts and the bolts and the machinery," he said. "If you look at the replacement cost and the market cap in the United States, it shows that the market cap is something like 30% above the cost of replacing the capital", said Monash University economics professor Jakob Madsen.
However we know that the market does not act like a linear equation. Valuation of exchange-traded equities can sometimes be very subjective as after all, men are not programmed to trade like a computer program. There are many factors working at the same time affecting one's decision.
For the initiated, it is very much like a Butterfly Effect: 'sensitive dependence on initial conditions'
Yes, it is chaotic. Are you ready?
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