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Subject: RE: UKNM: More overvalued stocks
From: Steve Johnston
Date: Mon, 2 Aug 1999 10:24:54 +0100

> From: Clay Shirky [clayatshirky [dot] com (mailto:clayatshirky [dot] com)]

> > > > Agreed, but is 'the mutual agreement of the interested parties'
> > > > what is actually going on here - other than in the most literal
> > > > sense.
> > >
> > > What's wrong with the literal sense of worth? Surely it
> is the literal
> > > sense people are interested in when they are working out a mutual
> > > agreement, no?
> >
> > Clay, I was referring to a literal sense of 'mutual
> agreement', not the
> > sense of worth.
> Same question then - what's wrong with a literal sense of mutual
> agreement? You seem to be suggesting that there is some notion of
> transactional value that doesn't involve mutual agreement, but I am
> having a hard time imagining where that value could be derived, if not
> from the assessments of the people involved.

It seems to me that company stocks (or speculative investments
generally) are an unusual case. Is it not that *my* 'mutual agreement'
is better than *yours* because my knowledge of 'all available
information' is better than yours? I buy your original point completely
about the market being efficient over time, and that short term
imbalances - particularly those evident shortly after an IPO - are what
forces the prices to converge on a point of truth. However, right now,
Freeserve is overvalued because the point of truth will be lower than it
is today. The 'mutual agreements' going on are based not on what the
stock is worth now, but on what it may be worth in the future and that
hysteria and imperfect knowledge is fuelling the fire.

To return to your point above. I agree that mutual agreement drives the
transactional value, but drawing conclusions of the real value from the
transactional value without factoring in the knowledge of the
participants is flawed. Over time however, I agree, this averages out
and the market determines a more realistic value.

Steve Johnston
steve [dot] johnstonatentranet [dot] co [dot] uk
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