I understand your argument but I feel that property rights are a natural extension of the right to life in a disaster scenario. In such an event, the bread loaf you steal takes away the right to life away from someone who could afford that bread loaf. I argue that during an emergency a "price-gouging" shop keeper isn't any less moral than one who sells at normal price and runs out in a few minutes. Both, in effect, "killed people" except that the guy who "gouged" in price may have enough cash to pay for more goods from the inflated upstream providers and may have a chance of getting a re-supply and thus, possibly extend life further. One could make the compelling argument that in the event of a large disaster, the fair-price shop keeper may be the more immoral of the two. I do agree with you, the question is far more reaching than just 'should we ban price-gouging' and I don't think we can even definitively answer it. In my opinion, the best "solution" is to simply provide a much more robust disaster preparedness plan.
hmmmm, well, after you've graduated from 9th grade econ you can take higher levels of econ where you do get to wonder about things whether price gouging in cases of emergencies are okay. There are valid (and moral) arguments for allowing price gouging. Take the following logic:
If you do not permit price gouging then in case of an emergency, say a flood, fresh water (bottled water) supplies will be in huge demand. If you do not allow prices to rise then a shortage will naturally develop as the first people in the door will walk out with the majority of the water (nor can you legally force a shop owner to make a maximum purchase limit). Now, is that any more moral than restricting based on price? In the former case, the poor, old and infirm will likely be the last ones to think (or be able to) stock up ahead of time and the rich and/or able will end up with all the supplies. In the latter case, well, the same thing happens.
So to restrict price gouging seems to me to be an infringment on liberty and is like putting a band-aid on a severed limb. The problem is that there is no effective government response plan to alleviate shortages and provide basic services, shortages and price-runs are attempting to fix the "effect" side of a cause-effect relationship. It might make you feel better and "moral" but you really didn't accomplish anything in the process.
I think you are reading a bit too much into PE ratio, it's a very common problem. Think of it like this, the PE ratio is the "effect" in a cause-and-effect relationship. Just because the effect is there, doesn't neccessarily mean that the "cause" triggered it. A high PE ratio can be the effect of large future growth assumptions or other variables. It is just a metric to use in judging relative valuations but you cannot use it to directly say "this company has a 2x PE than that company, it must need to grow at twice the rate". It is just price/earnings, nothing more. A companies PE can skyrocket because of a single bad quarter without any bearing on future growth rate.
If you are wanting to know, how much faster must Google grow relative to stock X in order to justify this price, then what you really need to do is do a proper cash flow analysis and determine the growth rate neccessary to justify the current price and then see whether that makes sense to you. This process is as much art as science and is why there are scores of pros (and people that think they're pros) that do this day-in and day-out. Be careful with metrics, even simple ones like the PE and PEG aren't quite as powerful as many think, they are but one tool of many that must be properly applied. Something like 60% of large-cap funds fail to beat the S&P and these people make their livings off of this stuff, these aren't easy things to do.
The price of a stock (expecially ones that do not pay dividends) is based on its future growth, i.e., a value that the company will eventually have (and earnings that they will eventually be able to pay dividends on). The current monetary value of the company is simply the amount of shareholder equity. The price-to-book ratio for google is ~12, so roughly for every dollar in share price you are buying 1/12 dollar in actual value. The other 11/12th comes from expected future value, not its current value.
The current share price is a reflection of what the market thinks the company will be worth in the future. When you buy a stock you are saying that you think the market is wrong and the company will grow earnings faster than projected. If it grows at exactly 100% of the market's forecasted rate you will break even because that future growth is already factored into the price. Usually people do use averages of the previous x-days close price, etc to smooth out the normally small variations caused by the fact that the clearning price is set by short-term supply and demand.
The P/E ratio is just a easy-to-use metric for valuation, one of many, but it provides a quick way to compare companies in the same industry without expending too many brain cells. Valuation of companies is both an art and a science. One made much harder when they have such uncertain growth rates and don't pay dividends and cannot forecast when they will, thus you will see growth estimates that are really all over the board. But in general, a industry with a high PE is expected to grow much faster than ones with low P/E ratios. I think the SP avg is around 15 for a PE with solid and mature companies usually in the high teens and low 20s.
I don't quite understand the question though, if the company doesn't grow and doesn't pay any dividends the share price is only equal to shareholder's equity/shares (in reality, probably less). It isn't quite as easy as saying that you are expecting google to grow 4x faster yr/yr than microsoft. If you are looking for such a comparision i think you'd be better off looking at the PEG.
Except see you can't value a stock that pays no dividends unless you forecast its growth rate (actually you still need the growth rate even if it pays 100% of its earnings in dividends). Thus, stay with me here, you need forecasters. So calling the forecasters "asshats" really doesn't make any sense, now the fact that there were some "problems" with the quarterly report not meeting some of the aggressive forecasts mean that the average forecast was probably a little too high, thus a sell-off is completely normal.
You seem to have a misconception of how the markets work. The current price is based on expected future value. If the quarterly profits do not meet the forecasted target, that may be indicative of slower long-term growth. Since the current price is based on the long-term growth ability, less certainty on achieving such high growth rates will mean a lower share price. It's at a 70+ PE and Google has many hurdles ahead of itself before it can reach such lofty projections. Anything less than perfect execution will be heavily punished at such valuations due to the inherent riskyness of such forecasts.
When you invest for the "long haul" what you are saying is that you believe that the market is underestimating google's long term growth potential and that you know something that the broader market does not. To justify their current valuations, google's future dividend capability must be at such a high level as to warrant the current inflated stock price. When you are buying shares you should not be saying "i like this company, i think it will do well" b/c guess what, the rest of the market right now thinks the same thing (thus the current price). Market price reflects projected FUTURE VALUE, not current value. Thus the only way you should ever buy a stock for the "long-haul" is if you feel that the market has underestimated the projected future value.
not as I recall, though I could be mistaken. In the case of giving of stocks, options, gold, etc. when you did sell the asset, the income generated would be taxed at the capital gains tax rate that applies to you. Here is the kicker, since you received it as a gift, any amount over the limit would have a cost basis of zero and the entire amount would then be taxed. I could be wrong though, i'm hardly a tax attorney but i do remember reading that in the fine print while doing taxes last year.
easy, i wasn't trying to be an ass, i know they pay is actually good. It a "saying", as in something for all the bankers to joke around about around the water cooler. There are lots of old sayings, doesn't mean they are true. It used to be that banks were like the federal service, didn't really matter how well you did, seniority was all that counted. Since post-deregulation, things are very different. In short, ease up, it's slashdot, no one implied that you were making a lot of money.
you've never heard the old saying about banks and titles? Banks may pay lousy but they make up for it with fancy titles to put on your issued business cards. In the banking world, being a VP at 28 wouldn't be unheard of, they have VPs of Internet Security, Trust, Janitorial Services, Coffee Tasting, Logo Inspection, and the list goes on.
I fear you missed my point. Any CIO would do a NPV on the situation and present it to the CEO. Likely, the reason the CEOs aren't jumping on the idea isn't because the shareholders don't understand NPV (they don't have to, good use of NPV will increase share price), it is probably because the NPV of making the switch now is much less than the NPV of making the switch in the future.
Why should I agree to pay for new hardware, training, a price premium for people that understand IPV6 when I could just wait until IPV6 hardware is commoditized and needed and make the rollout then? Plus, for many American companies, there aren't any benefits to migrating now. Most do not have an IP space shortage and the vast majority of those that do are perfectly contended with IPV4. I don't think Starbucks is ready for each cup of coffee to have it's own IPV6 address yet, once they need that, then you'll probably see people jumping on the bandwagon.
almost, but any CIO worth his pay would have done a NPV analysis of the situation and presented the findings to the CEO. You could even ammortize the expenses out so that any single quarter wouldn't be overly effected, you know, kinda like how they pay for factory upgrades. But then agian, bashing capitalism is so much more fun. Maybe there are other reasons they are holding out.
i'm still confused, you can do this in java too. just stay away from system.windows and microsoft.* (although, even some of those are ported) and you are GtG. The P/Invoke stuff is there so you can move away from Win32s to.NET, but its presence != it is windows specific. You could make you own Linux.* library and do all sorts of fun linux specific stuff. A language doesn't remove the programers need to write cross-platform code, in this case, it just makes it easier.
being the.net programming and win32 programing have nothing in common except for the fact that you can use both to make windows programs, your argument seems a little short sighted. You can program with windows forms and use those forms on linux with mono, it actaully works pretty well. Then theres always gtk#
How is this insightful, mono is not a language, mono is an environment. You must first understand what.net actually is. The idea is that the langauage you write a program in is largely irrelevant since all languages that operate on the.net platform are compatible with each other at the "compiled" level without such interop go betweens such as COM (i know compiled is slightly a misnomer, but it works conceptually). So you write a class in VB.Net, I write one in C# and chuck down the hall writes another class in J#, but magically when you hit compile it all just works. This is due to an intermediate representation that all the higher languages get compiled into. Mono is nothing more than the environment (which is a standard) in the Linux world. They also have implemented most of the standard libraries. I have used it, frequently and it works, one executable written in different languages working on multiple platforms without a VM overheard like java.
This is a bit of a tricky situation. NT was blasted because (among other things) horrible graphics performance compared to the 9x series. So msft made a decision to move many features back into the kernel. Computer-Techy types cried out in fear b/c now the latest crappy Nvidia driver could wipe the system, but msft slowly got what it wanted when people finally started moving to the NT code base (which wouldn't have otherwise happened). Now we have the proc resources (and vendor cooperation) to handle another layer of abstraction so MSFT is moving back that direction.
Linux on the other hand could take the safe route (b/c bledding edge graphics performance wasn't as much an issue and the user population was certainly more geeky than it is now) and maintain the stability track. Its comparring apples to oranges, they are both round but ultimately different entities. The MSFT user base of the time != the Linux base.
probably that linux kernel developers are safer at them. with the 3d graphics wars users are routinely subjected to "Dubious Optimization Flags" in order to eeek out a little bit more performance
companies still do find bugs, but this claimed "bug" was a design decision. It is one of those rare times when "its not a bug, its a feature actually applies."
I dont know about everyone else, but i've been using 2k/XP since 2k and I have got ONE BSOD and that was due to a buggy video driver that I knew was buggy when I put it on. Im just one person but most of the MS bashing seems to be pre 2k/XP complaints. Now as for security, feel free to complain about that, but XP is stable. Remember on the security front though, Microsoft has set their mind to fix this issue, Linux zealots would be warry to rest on their laurels.
Its not, it was a design decision to give people the speed the demanded from graphics hacks. It was a strategic move to get people into the NT world. Now people are in the NT world and msft is moving to shut down that flaw now that hardware and proc speed is fast enough to handle the performance hit.
Just for reference, a bad driver in the linux kernel can do the same thing, try running a S3 Savage driver in linux, you'll get all sorts of fireworks.
Why not? People are wrong all the time, it doesn't mean that future mussings aren't valid.
People run around thinking that.NET is just M$FTs java when they dont see the forest for the trees like Miquel does. Bash microsoft all you want, once longhorn comes out they may actually have a better command prompt, file system, gui, extensibilty support and more over Linux and people are still focusing on how.NET is or isn't like Java.
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I understand your argument but I feel that property rights are a natural extension of the right to life in a disaster scenario. In such an event, the bread loaf you steal takes away the right to life away from someone who could afford that bread loaf. I argue that during an emergency a "price-gouging" shop keeper isn't any less moral than one who sells at normal price and runs out in a few minutes. Both, in effect, "killed people" except that the guy who "gouged" in price may have enough cash to pay for more goods from the inflated upstream providers and may have a chance of getting a re-supply and thus, possibly extend life further. One could make the compelling argument that in the event of a large disaster, the fair-price shop keeper may be the more immoral of the two. I do agree with you, the question is far more reaching than just 'should we ban price-gouging' and I don't think we can even definitively answer it. In my opinion, the best "solution" is to simply provide a much more robust disaster preparedness plan.
have you ever played the game? stripped down is hardly fair.
hmmmm, well, after you've graduated from 9th grade econ you can take higher levels of econ where you do get to wonder about things whether price gouging in cases of emergencies are okay. There are valid (and moral) arguments for allowing price gouging. Take the following logic:
If you do not permit price gouging then in case of an emergency, say a flood, fresh water (bottled water) supplies will be in huge demand. If you do not allow prices to rise then a shortage will naturally develop as the first people in the door will walk out with the majority of the water (nor can you legally force a shop owner to make a maximum purchase limit). Now, is that any more moral than restricting based on price? In the former case, the poor, old and infirm will likely be the last ones to think (or be able to) stock up ahead of time and the rich and/or able will end up with all the supplies. In the latter case, well, the same thing happens.
So to restrict price gouging seems to me to be an infringment on liberty and is like putting a band-aid on a severed limb. The problem is that there is no effective government response plan to alleviate shortages and provide basic services, shortages and price-runs are attempting to fix the "effect" side of a cause-effect relationship. It might make you feel better and "moral" but you really didn't accomplish anything in the process.
I think you are reading a bit too much into PE ratio, it's a very common problem. Think of it like this, the PE ratio is the "effect" in a cause-and-effect relationship. Just because the effect is there, doesn't neccessarily mean that the "cause" triggered it. A high PE ratio can be the effect of large future growth assumptions or other variables. It is just a metric to use in judging relative valuations but you cannot use it to directly say "this company has a 2x PE than that company, it must need to grow at twice the rate". It is just price/earnings, nothing more. A companies PE can skyrocket because of a single bad quarter without any bearing on future growth rate.
If you are wanting to know, how much faster must Google grow relative to stock X in order to justify this price, then what you really need to do is do a proper cash flow analysis and determine the growth rate neccessary to justify the current price and then see whether that makes sense to you. This process is as much art as science and is why there are scores of pros (and people that think they're pros) that do this day-in and day-out. Be careful with metrics, even simple ones like the PE and PEG aren't quite as powerful as many think, they are but one tool of many that must be properly applied. Something like 60% of large-cap funds fail to beat the S&P and these people make their livings off of this stuff, these aren't easy things to do.
The price of a stock (expecially ones that do not pay dividends) is based on its future growth, i.e., a value that the company will eventually have (and earnings that they will eventually be able to pay dividends on). The current monetary value of the company is simply the amount of shareholder equity. The price-to-book ratio for google is ~12, so roughly for every dollar in share price you are buying 1/12 dollar in actual value. The other 11/12th comes from expected future value, not its current value.
The current share price is a reflection of what the market thinks the company will be worth in the future. When you buy a stock you are saying that you think the market is wrong and the company will grow earnings faster than projected. If it grows at exactly 100% of the market's forecasted rate you will break even because that future growth is already factored into the price. Usually people do use averages of the previous x-days close price, etc to smooth out the normally small variations caused by the fact that the clearning price is set by short-term supply and demand.
The P/E ratio is just a easy-to-use metric for valuation, one of many, but it provides a quick way to compare companies in the same industry without expending too many brain cells. Valuation of companies is both an art and a science. One made much harder when they have such uncertain growth rates and don't pay dividends and cannot forecast when they will, thus you will see growth estimates that are really all over the board. But in general, a industry with a high PE is expected to grow much faster than ones with low P/E ratios. I think the SP avg is around 15 for a PE with solid and mature companies usually in the high teens and low 20s.
I don't quite understand the question though, if the company doesn't grow and doesn't pay any dividends the share price is only equal to shareholder's equity/shares (in reality, probably less). It isn't quite as easy as saying that you are expecting google to grow 4x faster yr/yr than microsoft. If you are looking for such a comparision i think you'd be better off looking at the PEG.
Except see you can't value a stock that pays no dividends unless you forecast its growth rate (actually you still need the growth rate even if it pays 100% of its earnings in dividends). Thus, stay with me here, you need forecasters. So calling the forecasters "asshats" really doesn't make any sense, now the fact that there were some "problems" with the quarterly report not meeting some of the aggressive forecasts mean that the average forecast was probably a little too high, thus a sell-off is completely normal.
You seem to have a misconception of how the markets work. The current price is based on expected future value. If the quarterly profits do not meet the forecasted target, that may be indicative of slower long-term growth. Since the current price is based on the long-term growth ability, less certainty on achieving such high growth rates will mean a lower share price. It's at a 70+ PE and Google has many hurdles ahead of itself before it can reach such lofty projections. Anything less than perfect execution will be heavily punished at such valuations due to the inherent riskyness of such forecasts.
When you invest for the "long haul" what you are saying is that you believe that the market is underestimating google's long term growth potential and that you know something that the broader market does not. To justify their current valuations, google's future dividend capability must be at such a high level as to warrant the current inflated stock price. When you are buying shares you should not be saying "i like this company, i think it will do well" b/c guess what, the rest of the market right now thinks the same thing (thus the current price). Market price reflects projected FUTURE VALUE, not current value. Thus the only way you should ever buy a stock for the "long-haul" is if you feel that the market has underestimated the projected future value.
not as I recall, though I could be mistaken. In the case of giving of stocks, options, gold, etc. when you did sell the asset, the income generated would be taxed at the capital gains tax rate that applies to you. Here is the kicker, since you received it as a gift, any amount over the limit would have a cost basis of zero and the entire amount would then be taxed. I could be wrong though, i'm hardly a tax attorney but i do remember reading that in the fine print while doing taxes last year.
easy, i wasn't trying to be an ass, i know they pay is actually good. It a "saying", as in something for all the bankers to joke around about around the water cooler. There are lots of old sayings, doesn't mean they are true. It used to be that banks were like the federal service, didn't really matter how well you did, seniority was all that counted. Since post-deregulation, things are very different. In short, ease up, it's slashdot, no one implied that you were making a lot of money.
you've never heard the old saying about banks and titles? Banks may pay lousy but they make up for it with fancy titles to put on your issued business cards. In the banking world, being a VP at 28 wouldn't be unheard of, they have VPs of Internet Security, Trust, Janitorial Services, Coffee Tasting, Logo Inspection, and the list goes on.
I fear you missed my point. Any CIO would do a NPV on the situation and present it to the CEO. Likely, the reason the CEOs aren't jumping on the idea isn't because the shareholders don't understand NPV (they don't have to, good use of NPV will increase share price), it is probably because the NPV of making the switch now is much less than the NPV of making the switch in the future.
Why should I agree to pay for new hardware, training, a price premium for people that understand IPV6 when I could just wait until IPV6 hardware is commoditized and needed and make the rollout then? Plus, for many American companies, there aren't any benefits to migrating now. Most do not have an IP space shortage and the vast majority of those that do are perfectly contended with IPV4. I don't think Starbucks is ready for each cup of coffee to have it's own IPV6 address yet, once they need that, then you'll probably see people jumping on the bandwagon.
almost, but any CIO worth his pay would have done a NPV analysis of the situation and presented the findings to the CEO. You could even ammortize the expenses out so that any single quarter wouldn't be overly effected, you know, kinda like how they pay for factory upgrades. But then agian, bashing capitalism is so much more fun. Maybe there are other reasons they are holding out.
i'm still confused, you can do this in java too. just stay away from system.windows and microsoft.* (although, even some of those are ported) and you are GtG. The P/Invoke stuff is there so you can move away from Win32s to .NET, but its presence != it is windows specific. You could make you own Linux.* library and do all sorts of fun linux specific stuff. A language doesn't remove the programers need to write cross-platform code, in this case, it just makes it easier.
being the .net programming and win32 programing have nothing in common except for the fact that you can use both to make windows programs, your argument seems a little short sighted. You can program with windows forms and use those forms on linux with mono, it actaully works pretty well. Then theres always gtk#
How is this insightful, mono is not a language, mono is an environment. You must first understand what .net actually is. The idea is that the langauage you write a program in is largely irrelevant since all languages that operate on the .net platform are compatible with each other at the "compiled" level without such interop go betweens such as COM (i know compiled is slightly a misnomer, but it works conceptually). So you write a class in VB.Net, I write one in C# and chuck down the hall writes another class in J#, but magically when you hit compile it all just works. This is due to an intermediate representation that all the higher languages get compiled into. Mono is nothing more than the environment (which is a standard) in the Linux world. They also have implemented most of the standard libraries. I have used it, frequently and it works, one executable written in different languages working on multiple platforms without a VM overheard like java.
Maybe you should have gone to a school where cheating isn't tolerated and whose students actually have the guts to kick out those who do.
very correct in noting the description between kernel and kernel *space*. correction noted.
This is a bit of a tricky situation. NT was blasted because (among other things) horrible graphics performance compared to the 9x series. So msft made a decision to move many features back into the kernel. Computer-Techy types cried out in fear b/c now the latest crappy Nvidia driver could wipe the system, but msft slowly got what it wanted when people finally started moving to the NT code base (which wouldn't have otherwise happened). Now we have the proc resources (and vendor cooperation) to handle another layer of abstraction so MSFT is moving back that direction.
Linux on the other hand could take the safe route (b/c bledding edge graphics performance wasn't as much an issue and the user population was certainly more geeky than it is now) and maintain the stability track. Its comparring apples to oranges, they are both round but ultimately different entities. The MSFT user base of the time != the Linux base.
probably that linux kernel developers are safer at them. with the 3d graphics wars users are routinely subjected to "Dubious Optimization Flags" in order to eeek out a little bit more performance
companies still do find bugs, but this claimed "bug" was a design decision. It is one of those rare times when "its not a bug, its a feature actually applies."
I dont know about everyone else, but i've been using 2k/XP since 2k and I have got ONE BSOD and that was due to a buggy video driver that I knew was buggy when I put it on. Im just one person but most of the MS bashing seems to be pre 2k/XP complaints. Now as for security, feel free to complain about that, but XP is stable. Remember on the security front though, Microsoft has set their mind to fix this issue, Linux zealots would be warry to rest on their laurels.
Its not, it was a design decision to give people the speed the demanded from graphics hacks. It was a strategic move to get people into the NT world. Now people are in the NT world and msft is moving to shut down that flaw now that hardware and proc speed is fast enough to handle the performance hit.
Just for reference, a bad driver in the linux kernel can do the same thing, try running a S3 Savage driver in linux, you'll get all sorts of fireworks.
Why not? People are wrong all the time, it doesn't mean that future mussings aren't valid.
.NET is just M$FTs java when they dont see the forest for the trees like Miquel does. Bash microsoft all you want, once longhorn comes out they may actually have a better command prompt, file system, gui, extensibilty support and more over Linux and people are still focusing on how .NET is or isn't like Java.
People run around thinking that