> They care most about the share price, whose most important determinants are
> profits and valuation levels (themselves a joint function of interest rates
> and sentiment).
Right but as Roe points out present share price depends as well on its long-term anticipated price, which raises the question of why net real investment meant to secure greater future annualized returns does not boost share prices in the short term.
> The American biz press today is full of stories about how Asia
> (and to a lesser extent Europe) overinvested in marginal projects because
> of the absence of shareholder discipline.
>
Well, then a defensive increase in the rate of " interest" would not be
the cause of slackened accumulation, as you suggest in the book, but a
response to the declining rate of profit.
> Fun factoid along these lines: Microsoft, with almost no physical capital
> infrastructure, has a market cap higher than Exxon's, which has a giant one.
>
On the whole, however, I would think high technology companies, which are
not monopolies, are undervalued by the stock market; stock market players
are not capable of evaluating the soft information high tech companies
provide in their formative stages; moreover, strictures against inside
trading militate against purchase by those who can make the proper
evaluation. Warren Buffet eschews high tech for MacDonald's. Of course
bank-centered finance has not proven itself any better at financing
innovation. Perhaps the undervaluation of high technology companies has
depressed investment levels in the technologies of the future?
> I say there, and I'll say again, that Jensen is really onto something in
> his argument about free cash flow - that mature corporations throw off more
> cash than they can reinvest at a "satisfactory" rate of profit.
I am not at all convinced that you have demonstrated that capitalism is choking on an excess of surplus value. For example, there remains a scarcity of retained earnings to needed investment. That amount of investmetn which is needed to replace simply the plant and equipment used up in a given year--fixed non residential capital consumption--has *increased* dramatically in relation to undistributed corporate profits, though not so much in the 90s of course.
> Financial structures are about more than dividing the booty - they help
> structure social classes and affect the mode of production. The late
I agree of course, but I am going to read Hilferding's Finance Capital to get a better sense of the debate. Best, Rakesh