And Tobin's point is that we're all feeling bubble-icious.
Handwaving about intangible values or customer goodwill doesn't change the fact that market expectations are primarily built on faith in the future, which is an entirely irrational basis for economic decision-making.
It's certainly difficult to quantify the value of IP, as opposed to the value plant and machinery.
But are most valuations driven by guesses about the future value of IP that have at least some connection with economic reality? Or are they driven by hope, hype, and momentum?
The reliable and empirically predictable manic-depressive boom-bust cycle of corporate capitalism strongly suggests the latter.
Or to put it another way - at some point the QE taps are going to be turned off, and the economy is going to have to go back to buying and selling stuff that people want instead of relying on stock price inflations created by cheap money hand-outs to banks so generously donated by the Fed and the other national banks.
Anyone who thinks there won't be a "significant adjustment" when that happens is - IMO - fooling themselves.
> "market expectations are primarily built on faith in the future, which is an entirely irrational basis for economic decision-making"
Faith in some version of future events is the only rational basis for economic decision making. You pay present money in the hope of future value, because otherwise you'd simply retain the present discounted value of the purchase price.
As long as that faith isn't blind, but instead well researched and based on a defensible thesis, there's nothing wrong with it.
On a company-by-company basis, it's practical to evaluate how much of the company's market value derives from intangible components like goodwill and market position, but it's much harder to do it on the scale of an entire economy, which is what the analysis in the article claims to do.
It's more reasonable to look at capital intensive industries like manufacturing and agriculture and see if their Q values are historically high. Lumping compannies like Adobe and Apache into that same group and using the same metrics for the whole group is disingenuous.
Handwaving about intangible values or customer goodwill doesn't change the fact that market expectations are primarily built on faith in the future, which is an entirely irrational basis for economic decision-making.
It's certainly difficult to quantify the value of IP, as opposed to the value plant and machinery.
But are most valuations driven by guesses about the future value of IP that have at least some connection with economic reality? Or are they driven by hope, hype, and momentum?
The reliable and empirically predictable manic-depressive boom-bust cycle of corporate capitalism strongly suggests the latter.
Or to put it another way - at some point the QE taps are going to be turned off, and the economy is going to have to go back to buying and selling stuff that people want instead of relying on stock price inflations created by cheap money hand-outs to banks so generously donated by the Fed and the other national banks.
Anyone who thinks there won't be a "significant adjustment" when that happens is - IMO - fooling themselves.