Main Page Contact Register Log In


But why wouldn't long-term prosperity cause short-term increases? If I knew stock was going to be worth a hundred times as much in fifty years, then at an interest rate of 5% per year I'd be able to sell it for 95 times as much in 49 years, which means I could sell it for 90.25 times as much after 48 years etc. The end result is the stock jumping by a factor of 7.7 immediately. Otherwise you're expecting that the stock will rise by more than 5% in some year but for people not to buy it for that much.






Long-term prosperity does cause short-term increases. The problem is that short-term increases are often achieved at the expense of long-term prosperity. For instance, in 1987 GM made a drastic change in its accounting practices reducing the estimated depreciation rate for its assets. On paper, this increased profits by over one billion which naturally increased its share price. However, in the long term the new accounting method meant that the company would have to pay more taxes thus reducing the real value of the company’s assets. Not surprisingly, 22 years later such methods lead the company to file for bankruptcy.
69%
melian
stars0
Replies (1)


A lot of moves that lead to long-term prosperity don't produce evidence that's publically visible. Companies do have trade secrets and are not open about all their strategic objectives years down the line.

What they have to be open about with quarterly earning reports, is numbers of how much revenue they create in a given quarter. There are choices that can increase short term revenue at the cost of long-term revenue where the effects are not apparant to the outside world but are predictable based on propertiary company information.
64%
ChristianKl
stars0
Replies (0)