when values are considered, the causal relation is not from present to the future but from the future to present. - Irving Fisher
While Irving Fisher in the investment committee is best known for his bad predictions before the 1920's stock market crash where he lost everything, he was towering force in economic pre-Keynes. Unfortunately, trading is not the same as theorizing. Nevertheless, his insights on looking to future expectations discounted back to the present is the critical idea behind all financial valuation.
The focus on any valuation is not about looking at the past and not extrapolating but a focus on discounting the future cash flows or future expectations. An expectations market can move in a lot of direction and requires more work because an investor has to measure the expectations of others and weight their own view with the view of others.
No comments:
Post a Comment