[jnordwick]

> It not right to say it’s irrelevant, it is, but the most important thing is what the market is willing to pay

That's what he's saying, just he's a step ahead of you. Why is the market willing to pay that much? Because that is what they see the company being worth in the future. Repeated studies consistently the correlation between stock price and future returns to investors when adjusted for other factors that might shift value away from the investor (eg, bad governance, risk, etc). There is no predictor that is better (this is important part - its comparisons against other indicators when trying to predict the future - bc predicting the future is kind of difficult).

> Additionally, I think your equation is wrong.

market cap is forward looking. balance sheet value is backwards looking. market cap is also a guess on how much is returned to investors and not taken by other factors - legal, illegal, intended, or unintended.

Viewing the market as irrational is essentially an anti-science stance - its religious. There is no way to prove that belief wrong because people just keep saying its being irrational when it disagrees with their valuation.