You are correct in distinguishing between price and value. Over the long haul, they tend to correlate closely. But at extremes, they can be quite far apart.

The repricing of risk can drive a wedge between value and price when — as now — investors are worried more about the return of their capital than they are of a return on their capital. Repricing can happen very quickly in efficient markets, but government intervention can slow the process of repricing down. However, in the case of Bear Stearns, the Fed allowed the repricing to occur, but it guaranteed enough of Bear’s assets to allow an orderly liquidation and transfer of the obligations of the company to JP Morgan. That was an astute distinction on the part of the Fed.

The Fed did not bail out the Wall Street mavens, but rather it bailed out the company’s customers.

Thanks for the commentary. I like your characterization in another post of this moment as more of a “panic”.

Perhaps we could also say that this is not so much a bailout as a Federal assumption of risk.

The panic will subside. One does not have to be an unalloyed optimist to see that the level of productive capacity and efficiency of production is as unprecedented as it seemed to be 6 months ago, and has actually increased over the six months.

Taking another tack, one might say that price is at issue, not value.

To get close to the concerns of some of your readers, there are any number of things whose prices during a panic drop below “value.” And as you said in another post, picking the values and the bottom is hard.

If an appreciation of the vastness of the economy and of development in general is any indication, the repricing may be more efficient and quicker than in earlier epochs. Especially as regards the repricing of real estate. How much faster is a question?