How to lose $37,700,000
Since this is an Investment Blog, I’d like to bring to your attention one of the dumbest things I’ve seen this week from The Guardian:
“A 1,000-year-old bowl from China’s Song dynasty sold at auction for $37.7m”
Now, I realise some readers may defend this by claiming the item is an antique, or its rare, or that it will go up in “value” * etc.
I don’t dispute any of these arguments. But, the fundamentals of any investing is that the value of an asset is derived from the expected present value of future cash flows.
Here, we have an asset that doesn’t produce cash flows. Therefore, it doesn’t have an inherent value. The buyer wants to blow $37.7 million. If someone later offers the buyer a higher price for the bowl in a few years time, it’s just being priced higher buy another buyer who wants to blow $X million. The value of the asset hasn’t changed, only it’s price.
Lesson Number 1:
“Price is what you pay, Value is what you get”
Never forget.
*Here, I’ve used the word “value”. When in reality, it’s being priced.
