Forum Archive Index - May 2002

["Capitalist" <capitalist@paradise.net.nz>]

The intellectual contributions by Snoopy, Winner and Dick on this issue have been most interesting. I would like to add my comments for those here who may have a more modest knowledge of economics.

Winner said:

<But what (does) that mean when the current BCA price is actually $4.55?

<Just confuses the situation. If nothing else I have demonstrated that trying
<to manipulate charts to reflect share of the pie and all that stuff that
<Snoopy and Phaedrus were debating last week is really a pointless (and
<confusing) exercise.

 

This exemplifies the basic premise that a thing is only worth what someone will pay for it.Economics 101.

 

To give a simple example, say I said to you "I will give you $10 for your bottle of coke", and you agreed. Then *that* is the price of a bottle of coke. If someone down the road does an algebraic calculation and concludes that the coke is worth $1, that is of no matter.Markets work in exactly the same way. They are 100% rational all of the time in respect of being  mutually agreed trade at a mutually agreed price between individuals with no coercion involved. Whether a third party thinks the price is irrational is of no consequence. Therefore when analysts say this share is trading for 50c but is really worth 15c one should take that with a healthy dose of scepticism. A is A, and what is, is. So, far from being fatuous and illogical, winner's comments are the apotheosis of rationality.