John Arnold tweet

Discussion in 'Wall St. News' started by dealmaker, Sep 13, 2016.

  1. dealmaker

    dealmaker

  2. CET

    CET

    If stocks were priced on their discounted cash flows the markets would be much much lower than they are now. Using the logical If Then Else you don't get past his If.
     
  3. Maverick74

    Maverick74

    How do you figure? That is how do you figure they would be much lower. I don't agree.
     
  4. newwurldmn

    newwurldmn

    They would be much much much higher.
    That's the arb actually. The market doesn't price discounted cashflows into perpetuity. If you bought the stock market today, after 17 years, you would get all your money back and be playing with houses money forever. Who actually believes that there will be no stock market in 17 years? And forget about the fact that earnings typically grow overtime as the economy grows and the economy gets more productive.
     
  5. Daal

    Daal

    Hi, could you explain how did you arrive at 17 years?
     
  6. newwurldmn

    newwurldmn

    PE is seventeen.
     
  7. Maverick74

    Maverick74

    When you discount cash flows into the future, as you move further out in time, the present value of the cash flow approaches zero. Therefore, at some point you have fully discounted all the cash flows and every year after that the PV will be near zero. This was John Arnold's point.
     
  8. Zzzz1

    Zzzz1

    I believe John Arnold's point was actually that the paranoia about whether Fed will raise rates in September, December, or early next year does not make much of a difference in the grand scheme of things.

     
  9. Maverick74

    Maverick74

    Yes because of the discount factor. It's just basic math and he correctly point that out.
     
  10. He's absolutely right... His tweets are spot on most of the time.
     
    #10     Sep 14, 2016