Subjective theory of value

[Paul]

@leonidia

Suppose in your example, the $10m was held in cash in $5 bills, and suppose further there existed a nationwide aversion to Abraham Lincoln, such that very few people would accept these bills. The “book value” of the stock might be $10, but there could be a very good reason why it was selling at less than book value. Or there might not be. Who’s to say?

There’s nothing wrong with the point you’re trying to make, but the particular example is awful. The cash is worth its face value no matter whether there’s a nationwide aversion to Dishonest Abe - you can still use them to pay taxes, etc., or the central bank will exchange them for $10 bills, etc.

[leonidia]

@Paul

@leonidia

Suppose in your example, the $10m was held in cash in $5 bills, and suppose further there existed a nationwide aversion to Abraham Lincoln, such that very few people would accept these bills. The “book value” of the stock might be $10, but there could be a very good reason why it was selling at less than book value. Or there might not be. Who’s to say?

There’s nothing wrong with the point you’re trying to make, but the particular example is awful. The cash is worth its face value no matter whether there’s a nationwide aversion of Dishonest Abe - you can still use them to pay taxes, etc., or the central bank will exchange them for $10 bills, etc.

My point is what if it’s not worth it’s face value? Clearly, it wouldn’t be to the market if (as in his example) the stock was priced at $1. So I was trying to think of an example (obviously not a very realistic one) where this could be the case, that’s all.