orchid,Personal view only here. I have to lean towards bvw on...

orchid,

Personal view only here. I have to lean towards bvw on this. I read the article just now as I have out most of the day.

The article does make some interesting points, but in trusth offers extremely limited information substantiating any of its postulations. In fact, it goes out of its way to dismiss the graphical and historical information that, like it or not, is factual that supports "value" over price.

The price of an asset is a one dimensional piece of a two dimensional beast. The cashflows/profit/distributions/dividends or whatever you may wish to call it are the second dimension when determining what an assets "price" or value should be. This is undeniable. It is also undeniable that over a sufficiently meaningful timeframe an asset's "price" moves in lockstep with the distributed profits that these assets generate. That's why the "price" of these assets goes up in truth. The market does reflect this, but not in the way that the article implies I am sorry to say.

Eg: CBA shares if you bought before the float where issued at $5.40 per share. From memory, they opended at some $6.80 or thereabouts. Say you bought at $6.80 and put them in the bottom draw. A fully franked full year dividend of 40 cents was paid. Or a "pathetic" yield of 5.9%. It's price has moved around all over the place up and down, but today trades (the price) at a yield of about 4.4%. The yield has gone down!!! Can you see how the price is irrelevant? The yield is 4.4%. But it's about $2.20 per year for every share that you bought at 5.40 back in 1991.

The price moves in lockstep with profit growth (or decline) over time. Price and Profit = Value. Price alone is rubbish/arbitrary/nonesense.

Also, I disagree with the supplied definition of "market". Nowhere was the term "mechanism" used. This is all the market is. It is a mechanism. Markets do not buy and sell things. People buy and sell things. And whether is is AJA or any otehr listed securities, if everyone holding said investments was happy to part with these investments at a what they were "valued" at, then sometimes the price would be right and other times it would not be.