How can this possibly be the same? Again: imagine a stock of a company that is very profitable and has stable cash flows and there is no indication this won't continue. Pekelo's claim was that this stock trades only at what people think it is worth. Everything, according to him, is valued by supply and demand. I disagreed and said that a stock may have short term fluctuations but if people valued this stock for whatever reason at a small fraction of its discounted future cash flows someone would come in very quickly and buy the entire free float of the stock. Fair value and the actual price can be very different. Crypto currencies are not backed by anything, not by any future cash flows or the expectation thereof. That was the difference I pointed out makes sense now?
Why Bitcon has value, an austrian school prespective
- Thread starter Daal
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It's two different arguments that never meet. Fundamentally, nothing can have value in the absence of people's belief that it has value. It makes no difference how that process was arrived at. Value is an agreement between persons, not an absolute. All equities trade at what people think they are worth. Your argument that Fair Value means someone would come in and buy the float of stock means that that someone Thinks the Stock Has Value. Sure it can be a logical process. Sure it can be superior to the valuation of a free-floating crypto-currency. But someone still has to think it for it to have any meaning. Unless you have an AI doing it - then you might have a counter-argument.
for the record, I'm not disputing your argument at all. I'm saying that you are not arguing the same thing:
The sky is blue!
Untrue! Water is actually wet.
That's my point. It's really more of a philosophical one. And not really worth an argument, anyway. he he. But I like philosophy, so... apologies.
cheers, my man.
Well you described basically the exact same point that I made. It still holds that the value humans attach to most stocks medium to long term is anchored in the stocks own fair value which is derived from hard cold basic math. There are times when irrational supply and demand takes place where stocks trade far away from fair value. It's not humans that decide what is fairly valued but the other way around, humans do the math and figure where fair value lies and then decide, based on current demand and supply, whether a stock is a buy or sell. There is no fair value in cryptos on the other hand. It's pure demand and supply. Nobody knows what fair value is, only where current supply and demand stands.
Huge difference.
Huge difference.
Actually, the ability to raise, or cost of raising, money through a debt offering can be highly dependent on the value of a company's stock (e.g. convertible bond), so I deduct Soros has a good point there.