From his Forbes column:
Secondly, and more importantly, the idea of discounting the future is fundamentally subversive.
Net present value is subversive now, is it?
Wherever there’s been mark-to-market or fair value accounting, executives in the financial world have used this technique to book profit and pay the bonuses made for themselves.
Sorry, NPV, mark to market and fair value accounting are all synonymous are they? Instead of being rather at odds with each other?
For example, your NPV might tell you that your holdings of option ARM mortgages are just fine and dandy. But the market might tell you that they\’re near worthless.
Which is correct in the long term is moot for this point: to claim that both valuation processes are exactly the same thing is absurd.
I have a feeling that what he\’s done is take the theoretical (and obviously true) point that the value of something today is the value of all future returns to it discounted at the appropriate interest rate and assume that prices in markets are exactly this.
Entirely missing out his hero Keynes\’ points about animal spirits.
How did he get a column there?