Hi Jason,
I think I failed to express my point clearly. I certainly don't believe that the discounted cash flow model is a description of the actual process that investors--whether primarily passive or primarily active--go through in terms of collecting data, predicting future cash flows, predicting future discount rates, and calculating the present-discounted value. It's a model. It's a mathematical simplification that reflects the salient features about how real-world information is translated into asset values through transactions in markets. A map is not a city: it is a model, a simplification that reflects the salient features of the city. The fact that investors don't "roll up their sleeves and put on their green eye shades" does not mean that the discounted cash flow model is not an accurate way of describing the relationship between information and asset values.
Similarly, I have never said that emotion plays no part in making investment decisions, and I would never say so: witness the stupendous amounts of money that are wasted in private equity and hedge fund investments because investors (most of them supposedly sophisticated) are trying to avoid the emotions triggered by perfectly rational changes in asset values!
Rather, my point was to caution you (and Tom) against the mistake of dismissing changes in asset values as "merely" the product of emotional decisions. The fact is that discount rates do change, throughout every day, and because that DOES happen, asset values DO change accordingly. When you mention "how people feel about 'the Market' right now," you are describing their discount rates, not "mere" emotion.
One last thing, Jason: you seem fixated on the idea that I believe markets "are perfect and deserving of unquestioning devotion." I don't believe I have ever said or written anything that should have led you to that conclusion, so please let it go. Thanks,
--Brad