Post by Bart on Aug 3, 2004 9:21:19 GMT -5
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PPS Reality Check From New Board Member By CDLIC
« Thread started on: Today at 04:45am »
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PPS Reality Check From New Board Member By CDLIC
Hi All,
I felt the following REPLY by Aandm78 (a first time poster) to a THREAD by Stevewen1 called "How do you estimate PPS" was important enought to copy Aandm78's post and give it a thread of its own.
First is Aandm78's post and my comments follow in a REPLY to his post.
Some might not like what he has to say, however, I believe he has painted an accurate picture of the future. The only part with which I don't agree is reagrding the possibility there is NOT a naked shorting still going on (and I could be dead wrong).
Ciao for now,
CDLIC
Here is Aandm78's post:
Typically when you estimate the share price of the company, you take in to account what future cash flows the company will generate. Then you discount those cash flows by a discount rate that is determined by the risk of those cash flows and then you get the share price. The cash flows that are taken in to account are usually dividends arising out of successful operations.
So the share price of a company today is determined by how the returns/earnings are going to be in the future. Every day, Every hour and every minute, when news and the market information changes, the outlook of a company also changes hence forcing a re-estimation of future cash flows or a re-estimation of the risk inherent in the business. This causes the price of the company's shares to fluctuate.
In an efficient market, all of these are taken in to consideration by investors - consisting of analysts, market makers, institutional investors and the retail investor and an equilibrium price is attained.
So the price of a share is not the value of a company's assets but it is the present value of future cash flows the company is able to generate. A company might have $30 billion dollars of assets but is unable to put those assets to use in order to generate revenue. In that case, the value of its shares will be in the sub-pennys. That is because, the common stockholders are not really the owners of the assets. Creditors and issuers of debt typically get the first cut of the assets, then you will have taxes, wages, preferred stock and then common stocks. The order of payments is listed in Chapter 7 of Federal Bankruptcy statutes.
I am not a basher and I have several millions of CMKX shares. But to illustrate my point, I have to say this. The price of the CMKX shares will not go up just because CMKX has 1.4 million acres in Saskechewan. It will only go up if it can successfully prove that it has diamonds and can make a significant amount of revenue through its assets.
Of course, naked shorting is an entirely different scenario, where the price of the stock has to go up when they are covered. But, if naked shorting is indeed not there, then unless the company comes out with PRs explaining how it would make revenue in the future (We have xxxxx carats of diamonds in the new kimberlite we found), there won't be a significant change in the price of the stock.
When we say a company is worth $100 billion dollars today, we are not referring to the assets it has. For example the latest Google IPO might actually make Google some $50 billion dollar company. That doesn't mean Google has $50 billion in assets. No company has so much. It just means that future revenues of Google as forecasted by the market, when discounted at a rate determined by the market, equates to $50 billion today.
I think, after all the naked shorted issues are over, when CMKX finds diamonds in its lands, the price of the stock will shoot up. You should hold long if you expect CMKX to find diamonds in its lands.
End
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Anandm78,
Welcome!
Well stated and explained. And, a heck of a first post. This is exactly how a stock is valued in --and this is important-- as you stated, "and efficient market".
Lots of diamonds, minerals, metals, etc., is what is going to kick the PPS up over the long run. In the short run, speculation and the naked short squeeze --assuming the naked shorting is still and issue-- will cause PPS to increase and, for that matter decrease,i.e., up/down, up/down, etc. Again, as you stated "(and if CMKX)...can make a significant amount of revenue through its assets".
And how does it "... make a significant amount of revenue through its assets"?...via efficient production. This is the key to building stockholder value along with increasing PPS.
I created a thread on this board Sunday that is DIRECTLY related to what you have stated. The title is called: Valuing Diamond Plays via A Rational Speculation Model.
At this moment, the thread is still on this board at: cmkx.proboards35.com/index.cgi?board=general&action=display&thread=1091382286
…however, if the board is wiped, then you can go to this Internet site where I found it and read the report:
www.kaiserbottomfish.com/s/Educational.asp?ReportID=71104
Keep up the great posting.
Ciao for now,
CDLIC
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Thanks CDLIC for creating a separate thread. I never mentioned that there is no naked shorting. I was just assuming that if naked shorting did not exist and there was fair market play then the price of the stock might actually be fairly valued based on the information that is publicly available about the company.
I also mentioned that if naked shorting existed then there will be short term gains due to covering of shorts but then in the long term the price will depend on future profitability. When I said investors should hold long - the long meant more than 1 year
I hope I am not misunderstood. In these times it is easy for one to be mistaken as a basher
PPS Reality Check From New Board Member By CDLIC
« Thread started on: Today at 04:45am »
--------------------------------------------------------------------------------
PPS Reality Check From New Board Member By CDLIC
Hi All,
I felt the following REPLY by Aandm78 (a first time poster) to a THREAD by Stevewen1 called "How do you estimate PPS" was important enought to copy Aandm78's post and give it a thread of its own.
First is Aandm78's post and my comments follow in a REPLY to his post.
Some might not like what he has to say, however, I believe he has painted an accurate picture of the future. The only part with which I don't agree is reagrding the possibility there is NOT a naked shorting still going on (and I could be dead wrong).
Ciao for now,
CDLIC
Here is Aandm78's post:
Typically when you estimate the share price of the company, you take in to account what future cash flows the company will generate. Then you discount those cash flows by a discount rate that is determined by the risk of those cash flows and then you get the share price. The cash flows that are taken in to account are usually dividends arising out of successful operations.
So the share price of a company today is determined by how the returns/earnings are going to be in the future. Every day, Every hour and every minute, when news and the market information changes, the outlook of a company also changes hence forcing a re-estimation of future cash flows or a re-estimation of the risk inherent in the business. This causes the price of the company's shares to fluctuate.
In an efficient market, all of these are taken in to consideration by investors - consisting of analysts, market makers, institutional investors and the retail investor and an equilibrium price is attained.
So the price of a share is not the value of a company's assets but it is the present value of future cash flows the company is able to generate. A company might have $30 billion dollars of assets but is unable to put those assets to use in order to generate revenue. In that case, the value of its shares will be in the sub-pennys. That is because, the common stockholders are not really the owners of the assets. Creditors and issuers of debt typically get the first cut of the assets, then you will have taxes, wages, preferred stock and then common stocks. The order of payments is listed in Chapter 7 of Federal Bankruptcy statutes.
I am not a basher and I have several millions of CMKX shares. But to illustrate my point, I have to say this. The price of the CMKX shares will not go up just because CMKX has 1.4 million acres in Saskechewan. It will only go up if it can successfully prove that it has diamonds and can make a significant amount of revenue through its assets.
Of course, naked shorting is an entirely different scenario, where the price of the stock has to go up when they are covered. But, if naked shorting is indeed not there, then unless the company comes out with PRs explaining how it would make revenue in the future (We have xxxxx carats of diamonds in the new kimberlite we found), there won't be a significant change in the price of the stock.
When we say a company is worth $100 billion dollars today, we are not referring to the assets it has. For example the latest Google IPO might actually make Google some $50 billion dollar company. That doesn't mean Google has $50 billion in assets. No company has so much. It just means that future revenues of Google as forecasted by the market, when discounted at a rate determined by the market, equates to $50 billion today.
I think, after all the naked shorted issues are over, when CMKX finds diamonds in its lands, the price of the stock will shoot up. You should hold long if you expect CMKX to find diamonds in its lands.
End
*******************************************************************
Anandm78,
Welcome!
Well stated and explained. And, a heck of a first post. This is exactly how a stock is valued in --and this is important-- as you stated, "and efficient market".
Lots of diamonds, minerals, metals, etc., is what is going to kick the PPS up over the long run. In the short run, speculation and the naked short squeeze --assuming the naked shorting is still and issue-- will cause PPS to increase and, for that matter decrease,i.e., up/down, up/down, etc. Again, as you stated "(and if CMKX)...can make a significant amount of revenue through its assets".
And how does it "... make a significant amount of revenue through its assets"?...via efficient production. This is the key to building stockholder value along with increasing PPS.
I created a thread on this board Sunday that is DIRECTLY related to what you have stated. The title is called: Valuing Diamond Plays via A Rational Speculation Model.
At this moment, the thread is still on this board at: cmkx.proboards35.com/index.cgi?board=general&action=display&thread=1091382286
…however, if the board is wiped, then you can go to this Internet site where I found it and read the report:
www.kaiserbottomfish.com/s/Educational.asp?ReportID=71104
Keep up the great posting.
Ciao for now,
CDLIC
--------------------------------------------------------------------------------
Thanks CDLIC for creating a separate thread. I never mentioned that there is no naked shorting. I was just assuming that if naked shorting did not exist and there was fair market play then the price of the stock might actually be fairly valued based on the information that is publicly available about the company.
I also mentioned that if naked shorting existed then there will be short term gains due to covering of shorts but then in the long term the price will depend on future profitability. When I said investors should hold long - the long meant more than 1 year
I hope I am not misunderstood. In these times it is easy for one to be mistaken as a basher