Forum Archive Index - May 2002

["tennyson@caverock.net.nz" <tennyson@caverock.net.nz>]

Hi Capitalist,
 

>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:
>
>>>From your perspective Dick you probably would have liked
>>to seen a chart showing how thw one BCH share worth $8.25 
>>in Dec 1998 has progressed to its value (exc dividends) 
>>of about $14.20 today.
>>
>>But what (does) that mean when the current BCA price
>>is actually $4.55? 
>>
>> 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. 
>
>



You have illustrated your point well Capitalist, but I'm not quite 
sure how it ties in with the discussion.   I don't think the value of 
the bottle of 'Coke' (to further your analogy)  is in dispute here.   
My interpretation of what Winner was saying, and to carry your 
analogy further, was that if one person says:

"Here I have a 600ml bottle of Coke", 

whereupon the neighbour walks in and says

"Ah, I see you have a pint bottle of Coke"

then this doesn't mean that one is right and one is wrong.  It just 
means they are thinking in different units.  But both people perceive 
the same amount of Coke.  It's the same idea with the BCA shares.  It 
doesn't matter if Dick sees the shares as Baycorp shares worth $14.20 
or Winner sees the shares as Data Advantage shares worth $4.55.   

Both are correct, but Dick sees fewer shares than Winner.  Fewer 
shares in such a proportion that makes the total value of the shares 
he holds the same as that which Winner sees.  The *overall value* of 
what they are talking about is not in dispute.   I think that this 
becomes obvious when you add back in the rest of what Winner said 
(like I did above), preceding his snipped quote that you highlighted 
for comment.

When Winner says that the manipulation of the chart to turn it into a 
Baycorp chart is pointless he is right in one sense.   He is right 
in the same sense that it doesn't matter whether we measure 'Coke' in 
millilitres or pints.   As long as we get the total right, it really 
doesn't matter in what units (be they DAD shares or BCH shares) we 
measure things.

Winner then extends his argument to say that because the shares are 
trading as BCA shares now, and these shares have the same nominal 
value as the DAD shares that existed before it is easier to look at 
the share chart as a straight DAD-BCA chart and forget about Baycorp.
I agree with him in that his suggestion is easier.   I disagree with 
him that he should forget about Baycorp.

Actually I doubt that Winner is still so resolute in his belief in 
forgetting Baycorp because of what he has written since: 


>
>
> 
>winner69 wrote:
>
>Dick, you obviously made good money on the old Baycorp.
>Interested in having another go seeing BCA is now more
>realistically priced? 
>
>



More realistically priced?   Huh?  Isn't Baycorp Advantage still 
trading in the narrow $3-$4 or so range it always has traded in?  The 
only sense that it is "more realistically priced" is the sense that 
if you look at the current shareprice in terms of what you paid for 
your Baycorp shares a few years ago, then you could argue the pricing 
today is more realistic.   

I don't think anyone could make the statement above that Winner did, 
without conceding that the old Baycorp share price trail still 
matters.

SNOOPY



 
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