Nobody Knows What a Stock Is Worth. That Is the Point.
A short tour of the beautiful, load-bearing fiction at the center of the market.
Ask five analysts what a share of a large public company is worth and you will get five numbers, each defended with a spreadsheet, each different from the price on the screen. This is not a failure of analysis. It is what a market is.
A stock is a claim on a company's future cash flows. Nobody knows the future. So the price is not a fact; it is a running argument between everyone who owns the stock and everyone who wants to. The number you see is where the argument happens to be paused right now.
Three things a price contains
A forecast. Some estimate of how much money the company will make, for how long, and how risky that is.
A discount rate. How much a dollar next year is worth today. This is set mostly by interest rates, which is why the whole market lurches when a central bank clears its throat.
A story. This is the part that embarrasses economists. Prices carry narratives: this company is the future, that one is a dinosaur. Narratives change faster than cash flows do.
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