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Originally posted by Halebop
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quote:Originally posted by stevieb
Hold on, I'm confused
Yes you are...
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quote:Originally posted by stevieb
Maybe I've misunderstood your position?
...Yes you have...
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quote:Originally posted by stevieb
...weren't you the guy that told me there is no relationship between risk and return. While I agree with your statements that people require higher long term return, the basis for them requiring this is surely that there is (or at very least they think there should be) a payback in return for greater risk. Maybe I've misunderstood your position?
When valuing a company, if I use a
higher discount rate, I achieve a lower valuation. If I achieve a lower valuation and then apply a 50% margin of error on top - I am only buying companies for much less than their intrinsic value. Being valued much less than intrinsic has nothing to do with risk. The qualitative factors verify risk, not the quantitative. A discount rate has nothing to do with risk. It's purely subjective. I don't actually see treasuries / government stock as being "risk free" yet they are offered referred to as such (or at least as the nearest proxy). But I do see excess risk in valuing a risky asset class at a "risk free" rate of return.