Everyone else has had a go, so I will have a turn.
Overpriced is where price is exceeds value (or overvalued), and can be defined three ways
(1) Relative overvaluation (Shadow gave a good example of this earlier - by comparing prices of like goods) (2) Absolute overvaluation (via use of financial valuation techniques, such as NPV of free cashflows ,or discounts to replacement cost, etc) (3) Intangible overvaluation (where there is no free cashflow and therefore no financial value. Where prices of items divert on trend or exceed the benefits of marginal utility etc - Art, Coins, Gold, Beer etc.)
The problem with (1) is it ignores the potential problem of an entire asset class being overvalued (ie: buying the cheapest US bank in 2007 was not a good idea) The problem with (2) is NPVs are really relative valuations because they rely on a fixed assumption on opportunity cost which in turn is based on the risk free rate, which can move around quite a bit. The price / replacement cost does not work for franchise style assets (what is the replacement of of Google???) The problem with (3) is that it is truely is an "eye of the beholder" metric.
So there is no real one measure IMO. And when you think about it, if there was, no asset would ever be "overpriced".
Ignore posts by The Whole Truth · View Post · End Ignoring The forum fuckwit goes RRRAAARRRGGHHhhh - But not a fuck was given..................by anyone.
I have always felt that provided there are buyers for something it isn't overpriced (ie .the market dictates the price.) Serious question though - does it make any difference to the definition if the market is driven by pure speculation?
in hindsight we can see markets which technically weren't overpriced (since there were free market buyers) but in some cases the product had little to zero value.
DOTCOM being a good example.
APF - a place where serious people don't take themselves too seriously. There's nothing else like it.
I have always felt that provided there are buyers for something it isn't overpriced (ie .the market dictates the price.) Serious question though - does it make any difference to the definition if the market is driven by pure speculation?
in hindsight we can see markets which technically weren't overpriced (since there were free market buyers) but in some cases the product had little to zero value.
DOTCOM being a good example.
I also believe that if something is driven by the market (ie an auction) then it sells for market value and is not over priced or under priced. I have done that before when I was getting rid of some old goods at my home, I simply put it on ebay for $1 with no reserve and whatever price it sells for, its market price. Likewise with a house auction (this is the bank's view too)
On your second point, the dot com market speculation means in 1999, publicly listed shares were market priced and in 2001 it was market priced. The big difference between the 2 prices is due to the fact the market moves with time. In 2001, the market price of Apple shares was around $10 - that was market price In 2013, the market price of Apple shares is around $491 - that is also market price
The market has simple moved in those 12 years for Apple shares.
willy_nilly
30 Aug 2013, 06:42 PM
Simple, when it does not sell for the price set.
That's how I feel with all the mansions which doesn't sell ... its overpriced in the current market. But all the houses which do sell, they are not overpriced because a buyer obviously felt it was worth that amount to them and was willing and had the means to buy that house.
I also believe that if something is driven by the market (ie an auction) then it sells for market value and is not over priced or under priced. I have done that before when I was getting rid of some old goods at my home, I simply put it on ebay for $1 with no reserve and whatever price it sells for, its market price. Likewise with a house auction (this is the bank's view too)
On your second point, the dot com market speculation means in 1999, publicly listed shares were market priced and in 2001 it was market priced. The big difference between the 2 prices is due to the fact the market moves with time. In 2001, the market price of Apple shares was around $10 - that was market price In 2013, the market price of Apple shares is around $491 - that is also market price
The market has simple moved in those 12 years for Apple shares. That's how I feel with all the mansions which doesn't sell ... its overpriced in the current market. But all the houses which do sell, they are not overpriced because a buyer obviously felt it was worth that amount to them and was willing and had the means to buy that house.
Yep, got my Apple share at $13 and they did a split since then as well that you have left out... Are they overpriced? No a chance when so much of the value is represented by Apples cash horde...
I also believe that if something is driven by the market (ie an auction) then it sells for market value and is not over priced or under priced. I have done that before when I was getting rid of some old goods at my home, I simply put it on ebay for $1 with no reserve and whatever price it sells for, its market price. Likewise with a house auction (this is the bank's view too)
On your second point, the dot com market speculation means in 1999, publicly listed shares were market priced and in 2001 it was market priced. The big difference between the 2 prices is due to the fact the market moves with time. In 2001, the market price of Apple shares was around $10 - that was market price In 2013, the market price of Apple shares is around $491 - that is also market price
The market has simple moved in those 12 years for Apple shares.
so we are saying that if Apple sells at $10 or $500 it is a fair price because that is the market price (im cool with that by the way). Apple isn't the same company today as it was many years ago though. What about the dimwit, zero value companies that people bought to be a part of the dotcom dream though? Were they over priced at the time?
fwiw i like to have a quiet drink on friday nights Trojan so feel free to tell me to STFU at any point
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