Intel Corp (INTC)

[Professor MD]

Dear Elmer. RE: I would like to believe there is a sudden increase in the real value of Intel but I haven't seen any evidence of it yet. I encourage you to make your case.

I believe that I did “make my case” by stating that the Chinese government’s decision to ask Intel Capital (IC) to help them emulate their business model automatically increased the actual value of the present (and future) IC investment.

I am going to try to “make my case” more clear. First the present value (PV) of IC is influenced by the estimate of the expected price IC can get if it decided to sell all its asset. Obviously the PV of IC requires the existence of credible buyers and their assumptions of the potential earning stream of IC. The Chinese government has accumulated an enormous reserve that it used to invest in USA federal bonds. Recently China indicated that its intention to switch their investment policy from USA bonds to a better yielding instruments. The China Investment Corporation (CIC) is the instrument created to execute the new investment policy. The decision of CIC to emulate IC for their future investment indicates that they believe that IC has the best and safest investment model they could find. It is expected that other investors will be influence by CIC evaluation of IC and increase their estimate of the PV of IC. An additional benefit to IC is the expected fees for investment advice that depends on the size of the actual investment.
I personally hope that Intel will sell half of their investment in IC to CIC and distribute the price as one time dividend to their long suffering investors.