Why Capital is Overvalued
Max Sawicky
sawicky at epinet.org
Fri Mar 5 08:54:59 PST 1999
> Max asked why investors should over value outdated equipment.
The
answer, in the sense, comes from Minsky. So long as the firms
are
earning money, even though these earnings float atop of a fragile
bubble, investors capitalize this stuff. During the bubble time,
weak
competitive forces allow the efficient and the inefficient alike
to
remain profitable. Once competition breaks out, the apparent
value of
the outdated equipment disappears.>
That's plausible enough, as far as it goes.
But if this always happens, why do the investors always make the
same mistake?
mbs
More information about the lbo-talk
mailing list