Is fundamental analysis redundant Essay Example for Free

Is fundamental analysis redundant Essay Introduction Shortly after the stock market crash in 1929, as the first batch of financial experts in the Great Wall, Benjamin Graham and David Dodd firstly mentioned the concept in a book called security analysis: Based on public information that intelligent investors are able to analyse securities and determine whether the current price of stocks and bonds is over or below their intrinsic value. The Critical thinking and strong logic make this theory become the foundation of nearly all investments theories in Wall Street. Warren Buffett, John Neff, Peter Lynch and other famous investors become the  best practitioners in fundamental analysis. This essay will firstly introduce the related theories of fundamental analysis. Secondly, the essay will explain free cash flow model to equity valuation and the qualitative and quantitative factors of fundamental analysis. Thirdly, choosing a particular company analyses the relationships between the leading financial ratios and its stock price. Finally, indicating why financial ratios and free cash flow model cannot explain Berkshire Hathaway cooperation’s stock price changed during global financial crisis. Theory Aasuumption Metholody Theory Fundamental analysis which is based on analyzing the intrinsic value of securities, focuses on factors affecting the stock price and its trend and lets investors determine what type of securities they choose to buy and when to buy. (Lee and Swaminathan 1999, 8 )The basic assumption of fundamental analysis is that value investors believe that the market price is determined by its intrinsic value and the stock price can reflect its intrinsic value in the long term. Cash flow model Fundamental analysts use cash flow model, dividend model to roughly estimate a company’s intrinsic value. They assume that the stock price of the intrinsic value is its present value of the stream of expected cash flows and the selected reference values are based on generating the cash flow data. For example, using free cash flow model to measure intrinsic value, investors firstly assume the observed company can increase at constant rate and then choose the reference value based on a constant growth rate (g)to estimate free cash flow the next 10 years. Secondly, they calculate the present value of the 10-year cash flow based on the constantly discounted rate (k). Secondly, they estimate the terminal value P10=free cash flow*(1+g)/(k-g) and calculate its present value. Thirdly, they get the present value of the company and calculate pre- share value: equity value/numbers of shares. Rational investors can make well-informed investment decisions according to the relationship betw een market price and intrinsic value. Qualitative factors On the company level, fundamental analysis focused on two factors: qualitative and quantitative. Qualitative and quantitative analyses have a dialectical relationship. Both analyses should join together to analysis and inspect on a particular company. Although qualitative analysis is used for physical areas, with the usage to tackle non-financial information, it can be widely useful in business and finance fields.(kesh and Raja 2005, 167) The qualitative analysis of the company level is concerned with products and services, competitive advantage, management efficiency, corporate culture. Advanced products can get increasing cash inflows and improve company value (Carter and Demissew 2008, 63) because booming demand for products and services can lead to a high reinvestment rate of the company, this creates additional wealth.( Madden 2007, 125) Competitive advantage can includes producing capacity and the efficiency of a company’s design and cost controlling better than the industry’s competitors. Generating a competitive advantage for a company will creates stakeholder value. (Vilanova, Lozano and Arenas 2009, 63) The improvement of management efficiency can lower operating costs and company culture can enhance corporate image, leading to improvement of company value. Quantitative factors The quantitative factors in fundamental analysis are based on a deep understanding of financial reports which is the process of identifying opportunities and threats from the company, so investors must be concerned with the balance sheet, cash flow statement and income statement analysis. Financial statements consist of all important historical information about the company’s operation management during a specific time period (quarterly, annually). All these information provide an overview of a company’s business activities and can help managers assess the company’s wellbeing. (Dayanandan 2010, 116) Financial statement Different users are interested in different areas of the financial statements. For example, investors and equity holders are concerned with  expected earnings and dividends of the observed companies. Company’s executives usually focus on the company’s capacity. Therefore, based on historical reports, different users can get valuable information about what they concentrate on. Financial statement analysis includes selected data from financial statements to predict the company’s financial health.( Hagos and Pal 2010, 441) Applying these data from financial reports, such as profitability ratio, liquidity ratio, management efficiency ratio, debt ratio, market performance ratio analyses year by year to determine whether to buy or sell observed companies. Based on analyzing financial statements, financial analysts are able to use profitability ratio, including gross margin, ROE to indicate how efficiently revenue is generated. The liquidity ratio such as current ratio, net working capital can be used to prove the firm’s ability to generate sufficient liquidity when needed and to meet short term obligations. For example, current ratio is an indicator as a rate of current assets to current liabilities. It measures the liquidity status of a company. With a higher current ratio over time, this company will be able to meet its current obligations and experience less financial risk.( Zaki, Bah and Rao 2011, 315) Table1 Sourced by Berkshire Year ROE Total asset turnover Debt/equity P/E P/B closed Price 2003 0.105 0.588 1.32 12.7 1.34 $84280 2004 0.085 0.394 1.20 18.8 1.6 $87900 2005 0.093 0.412 1.16 15.5 1.45 $88620 2006 0.102 0.397 1.27 12.5 1.27 $109990 Table 1 above shows the some figures provided by Berkshire corporation’s annual report from 2003 to 2006. During this period, the stock price has a significant increase from $67600 in Jan 2rd, 2003 to $109990 in Dec 1st, 2006. And from 2003 to 2006, Berkshire Hathaway Inc’s net worth is $13.6billion, $8.3billion, $5.6billion and 16.9billion respectively. Graph1: Berkshire Hathaway(BRK) Inc’s stock price between 2003 and 2006 Sourced by yahoo finance The increase of Net worth can indicate the stock price’s change during this period. The gain in net worth during 2003 was $13.6billion, which increased the per-share book value of its stock by 21% from $41727 to $50498. Because of good quarterly reports and an annual report, the stock price reflected the company’s performance, rising from $67600 to $89490. However, between 2004 and 2005, the gain in net worth increased $8.3billion and $5.6billion. Although in 2004 Berkshire’s book-value gain of 10.5% fell short of the index’s 10.9% return, the net worth fell from $13.6billion to $8.3billion, leading to fluctuation of the stock price during 2004. In 2005, the net worth fell to $5.6 billion because hurricane caused loss worth of $34billion. And in the stock market, the price fluctuated and even slightly increased. However, the price reflected the company’s performance. As a multi-business company, its main business-insurance company called GEICO improved its management efficiency at nearly 32% and warranty numbers increased by 26%. On the other hand, insurance float of BRK’s insurance company increased from 46 billion to 49 billion. Due to the capital cost rate of mostly 0% and improving competitiveness, its stock price rose sharply. Financial ratios (price to book ratio and earnings per share ratio) measure share price compared to earnings, book value per share and indicate whether the market overvalues, undervalues and appropriately values the firm’ shares. Managers use to assess investors’ perceptions of future prospects. Some investors invest in stock market based on analyzing financial statements. Table2 Table2 shows mainly the relationship between the book value and stock price. Financial analysts are willing to use book value to measure the stock price. From the table 2 above, the book value of the Berkshire Hathaway increases from $14426 in 1995to $70281 in 2006 and the companys stock movements, rising from $31900 in 1995 to $110050 in 2006. In addition to particular years, these two charts reflect clearly whether a short term or a long term, the trend of the book value and stock price is roughly the same. In the long term, the growth rate of the net worth is a useful indicator to justify intrinsic value. From 1995 to 2006, the net worth of Berkshire Hathaway’s  net worth increased from $5.3billion to $16.9billion, more than 3.18 times growth during the period. Stock price had increased 3.44 times with book value 4.87 times. Although 1n 1999, the net worth fell to 0.358billion, in the long term, this company still had a significant increase in its stock market performance . Analysts also can apply activity ratios such as total asset turnover ratio and average payment ratio period to measure management effectiveness in managing its assets and to determine whether the investment in particular asset categories is too high or too low and also find out the efficiency or speed in converting accounts to sales or cash. (Dayanandan 2010, 114)Debt ratios such as debt to equity ratio and debt ratio can indicate financial leverage and the apparent financial risk assumed by the firm’s equity holders. Application Dow Jones Graph2 Dow Jones industrial index Sourced by yahoo finance Graph2 shows the change of Dow Jones industrial index before, during and after global financial crisis. The global financial crisis started in 2007 because the burst of housing bubble caused credit crisis especially in the debt markets.( McCarthy, Solomonand Mihalekl 2012, 1277 ) the stock market highly violated between 2007 and 2009. For example, in United States, the stock market increased to the peak in October 2007 with the Dow Jones Industrial Average about 14,000. After that duration, the Dow Jones dropped sharply from 12,000 in August 2008 to 6,600 in March 2009. After 2009, there is significant increase until now, rising to 14,929. Company- Berkshire Hatchaways Berkshires core business for insurance business includes the property casualty reinsurance and special class insurance company. For the past 25 years, this company has increasingly strong capital and little debt, for shareholders to create the value of more than 25% growth on average every  year. Table 3 shows analysis ratios and stock price from 2006 to 2012. Table3 Year ROE Total asset turnover Debt/equity P/E P/B closed Price 2006 0.102 0.40 1.27 12.5 1.27 $109990 2007 0.109 0.43 1.24 13.8 1.51 $141600 2008 0.046 0.40 1.41 38.16 1.71 $96600 2009 0.059 0.38 1.19 18.1 1.11 $99200 2010 0.08 0.37 1.29 14.9 1.24 $120450 2011 0.06 0.37 1.32 19 1.18 $114755 2012 0.077 0.38 1.23 14 1.1 $133000 Sourced by Berkshire Graph3 Berkshire’s stock price between 2006 and 2012 Sourced by yahoo finance The gain in net worth during 2006 was $13.6billion, which increased the per-share book value of its stock by 18.4% to $109990. In 2007, the net worth is 12.3billion, which increased the per-share book value of its stock by 11% to $141600. However, in 2008, the stock price fell to $96600, and then there is an increasing trend from 2009 to 2012. Total assets turnover ratio Total assets turnover ratio measures the management efficiency of the firm in managing its total assets to generate sales. A high ratio suggests greater efficiency. Figures shown in table3, the total assets turnover ratio during global crisis had slight change between 0.37 and 0.40. However, the stock price changed sharply, so the stock price can not reflect the stability of this ratio. ROE indicates the rate of return realized by a firms shareholders on their investments and uses as an indicator for the company’s operation. Return on equity (ROE) Return on equity (ROE) is the best indicator to learn how much money a company is making for its investors and measurement of the company’s operations. (Dayanandan 2010, 117) However, ROE is also sensitive to leverage. Assuming that proceeds from debt financing can be invested at a return greater than the borrowing rate, ROE will increase with greater amounts of leverage. From 2007 to 2008, the debt to equity ratio increased by 13.7%, from 1.24 to 1.41. However, ROE rate fell sharply from 10.9% to 4.6%. Although ROE overreact to debt change, Berkshire’s fundamental did not change in 2008. Most of Berkshires business is affected by the economic significant downward in 2009. However, its manufacturing services and retail generated a lot of cash flow and continued to consolidate their market competitive advantage. Berkshires two most important businesses: business insurance and utilities also had a good growth rate. These businesses produced a large amount of business prof its in 2008. P/E ratio P/E ratio is a common approach used by security analysts. In practice, investors usually use expected P/E ratio for the following year and analyse whether the stock price is overvalued or undervalued on the basis. P/E ratio indicates that a stock of its P/E rate over 30 is more likely to be overpriced. The P/E ratio in 2007 and 2008 is 13.8 and 38 respectively and the stock price during the period time of 2007 and 2008 is $141600 and $96600. The change of stock price is overreact to the pre-share earnings. P/B ratio P/B ratio gives some idea of whether an investor is paying too much for what would be left if the company went bankrupt immediately. From 2006 to 2009, P/B ratio increased or decreased had no direct correspondence with the stock price. However, to most companies, the book value is always lower than the stock price. Because most companies have intangible assets such as brand name, specialized skillsï ¼Å'product pricing power. These factors can not reflect in the balance sheet, but the long term trend of the market value is similar with book value. It seems that when P/B ratio increases, the gap between book value and stock price increases. On the other hand, the gap shows investors are willing to hold the stock due to its intangible assets. Cash flow model All these financial ratios cannot explain what happened in 2008 and using cash flow model to estimate the stock price also cannot explain this situation. Because investors assume the company can increase at constant rate. Although they use long-term GDP growth rate to reduce the risk of assessing value, this growth rate cannot explain and predict what happened during the investing period. They also use CAPM to measure discounted rate given by the risk-free interest rate plus a risk premium. The formula is ki=Rf+(Rm-Rf)ÃŽ ²i. However, ÃŽ ²sometimes cannot estimate risk between the market and stock. For example, a company’s market value increases from 10billion t0 20billion is less than market value of the company from 10billion to 3billion. If the company still operate well, from the market side, the risk of buying a company of the market value of 20billion is less than buying the same company of its market value of 3billion. Conclusion Therefore, during global financial crisis, fundamental analysis was useless. It is clear that during some periods the stock price is overvalued or undervalued significantly from its intrinsic value, leading to highly volatility of market price. Any market volatility is considered as irrational performances, so these market valuations caused by behavioral finance which do not have impacts on the company’s assets valuations and  operations. (Adams, Armitage and FitzGerald 2012, 157). In the long term, the trend of the stock price is similar to the trend of its intrinsic value. On the other hand, in the short term, market price is influenced and fluctuated by political, economic, psychological factors, so market price is always undervalued or overvalued, but it is fluctuating around the intrinsic value. Some research show that sometimes earnings information cannot react to the stock market simultaneously and all the public financial information pose a gradual influence on the stock market for a while. During global financial crisis, the stock price sharply fluctuated because of financial behavior. Debt crisis caused by housing loan had a significant impact on people’s confidence. Trader’s low confidence let them make decisions irrationally. Reference list 1. Lee, C.M.C. and Swaminathan, B. 1999. Valuing the Dow: A bottom-up approach. Financial Analysts Journal 55 (5): 4-23. 2. Kesh, Someswar. and Raja, M. K. 2005. â€Å"Development of a qualitative reasoning model for financial forecasting.† Information Management Computer Security 13 (2): 167-179. 3. Carter, T. and Demissew, D.E. 2008. Value innovation management and discounted cash flow. Management Decision 46(1): 58-76. 4. Madden, B.J. 2007. Guidepost to Wealth Creation: Value-Relevant Track Records. Journal of Applied Finance 17 (2): 119-130. 5. Vilanova, M., Lozano, J.M. and Arenas, D. 2009. Exploring the Nature of the Relationship Between CSR and Competitiveness.Journal of Business Ethics 87: 57-69. 6. Dayanandan, R. 2010. Working Capital Management for Sustainable Cooperatives. Global Business and Management Research 2(1): 102-124. 7. Hagos, T.M. and Pal, G. 2010. The means of analysis and evaluation for corporate performances. Annales Universitatis Apulensis : Series Oeconomica 12 (1): 438-449. 8. Zaki, E., Bah, R. and Rao, A. 2011. Assessing probabilities of financial distress of banks in UAE. International Journal of Managerial Finance 7 (3): 304-320. 9. McCarthy, Mary., Solomon, P., and Mihalek, Paul. 2012. Financial Crisis During 2007 And 2008: Efficient Markets Or Human Behavior? Journal of Applied Business Research 28 (6): 1275-1281. 10. Adams, A., Armitage, S. and FitzGerald, A. 2012. An analysis of stock market volatility. Annals of Actuarial Science 6ï ¼Ë†1ï ¼â€°Ã¯ ¼Å¡153-170.

A Comparison of Tragedy in Hamlet, The Book of Job, and Oedipus Rex Ess

Interpretations of Tragedy in Hamlet, The Book of Job, and Oedipus Rex    For ages, man has pondered upon the roots of destiny. Is the outcome of a man's life determined by human qualities and failings, the meddling of a divine power, or simple fate? Shakespeare's Hamlet made the argument that tragedy is caused by human folly. The idea that divine intervention is at the root of human suffering is put forth in the Book of Job. In Sophocles' Oedipus Rex, fate is given as the root of man's suffering. Three divergent perspectives on the origins of calamity exist within the tragedies Hamlet, Job, and Oedipus Rex. Shakespeare's Hamlet enforced the idea that Human suffering is a result of human faults. Hamlet possesses extreme indecisiveness, but at times exhibits dangerous recklessness. Both contribute to his ultimate destruction. The majority of the play consisted of Hamlet deciding when, where, and how to kill Claudius, the murderer of his father. When Claudius is alone praying, Hamlet had the perfect chance to avenge his murdered father, but he decided to postpone the act. "Up, sword, and know thou a more horrid hent. / When he is drunk asleep, or in his rage" (Hamlet III.iii.88-89). If Hamlet had simply slew Claudius at that juncture, the situation would have never complicated; the story would have been over. Such innocents as Hamlet's mother, Polonius, Laertes, and Ophelia would have never met tragic ends. Although Hamlet possessed the fault of indecisiveness, at times, he exhibited a recklessness that led to suffering. When Hamlet was in his mother's room he heard a rustling behind a tapestry that he presumed was Claudius. He decided to kill the man behind the curtain without checking to make sure th... ... misfortune is a matter of fate that cannot be changed by any mortal actions. All provide a valuable insight into one of life's greatest quandaries: the root of tragedy.    Works Cited Green, Joel B., & Longman, Tremper (Eds.). Holy Bible -- The Everday Study Edition. Dallas: Word Publishing. 1996. Shakespeare, William. The New Cambridge Shakespeare: Hamlet, Prince of Denmark. Ed. Philip Edwards. Cambridge: Cambridge U P, 1985. Sophocles.   "Oedipus Rex."   An Introduction to Literature, 11th ed. Eds. Sylvan Barnet, et al.   New York: Longman, 1997.    Works Consulted Fox, Robin Lane. The Unauthorized Version: Truth and Fiction in the Bible. New York: Vintage, 1991. G. K. Chesterton, "Introduction to The Book of Job",   The Hebrew Bible In Literary Criticism, Ed. and Comp. Alex Preminger and Edward L. Greenstein, (New York: Ungar)

How to Control an Over Population Country

In the late 1960s and early 1970s some environmentalists began making a sensational claim. The world†s ever increasing population, they claimed, would soon outstrip the planet†s limited resources leading to an environmental disaster. In these doom and gloom scenarios, a massive worldwide famine was just around the corner. The number of people would keep increasing while the amount of food available would stay the same or even decline. The result, the experts argued, was famine by the early 1980s at the latest. The only way to decrease the severity of the impending disaster was to adopt strict policies to control population. There will soon be 6 billion human beings on Earth: according to the latest population estimates released by the United Nations. At this rate, the world population is doubling every 40 years. On October 12, 1999 the world's population will reach 6,000,000,000 people. The overpopulation is a very vast subject, but my assignment will only explain the three major points of the overpopulation. The biggest concern of human beings is the decreasing rate of resources, as the years go by, resources are on a constant decline. Which means in a couple of years, if the population continuous to increase, are resources will disappear in a short term of time. Also, I will try to explain the reasons why this subject became what it is now . Why did did the population increase so much in the past decades, will be answered. And finally, will be looking at solutions to solve this problem in ethical and unethical ways. If everyone on the planet today would adopt a North American lifestyle, natural resources would quickly disappear. Luckily most nations are still careful. They will need to remain so while improving their standard of living. It will be necessary that others in wealthy nations curb their consumption and wastes. Our survival depends on population control as well as a better management of natural resources. Being limited in quantity, natural resources need to be managed accordingly. A new management of the planet's resources has to be planned. In spite of the population increase, famines have become less frequent in the past two hundred years, thanks to phenomenal agricultural yields, and global economy. In the last few years several African countries have been affected by famine. The causes were all due to political problems, including civil wars, that disorganize the economy, paralyze transportation, and prevent emergency food drops to reach their destination. Famine is no longer due to a global food shortage. Everyone's probably heard predictions that the world is going to run out of some essential resource. From copper to oil to food to hundreds of other things human beings use, â€Å"experts† like to come along and predict the imminent exhaustion of resources. The last two centuries have proven not only these individuals, but the very models underlining scarcity of resources, to be wrong. For example, food. Several times over the last 40 years so called â€Å"experts† predicted global famine because increases in food production couldn't possibly keep up with population growth. Thankfully, they were wrong. The best indications today are that food production will continue to outpace population growth for the foreseeable future statistics say. A other example is oil. Predictions of the world using up all its oil have been around for at least 70 years. They reached their peak in the 1970s with the oil crisis brought on by the Oil and Petroleum Exporting Countries' attempt to raise oil prices by voluntarily limiting supply . As the price rises, however, the quantity demanded by consumers decreases. As the price of gasoline increases, for example, consumers will tend to purchase more fuel efficient automobiles or find automobiles which use fuel sources not dependent on oil. This does not require any great leap in technology; there are already numerous alternatives to oil which would become economically feasible if the price of oil ever jumped significantly. Natural gas, for example, is likely to replace oil as the primary source of energy for the future sometime in the next century. In 1994 one of every two people lived in the city, while only one in ten did so in 1900. For hundreds of thousands of years the human population was growing at a low but steadily increasing rate. Then in less than 200 years, the world population went from 1 billion to 6 billion people. Why? Because the balance between birth and death has been broken. The recent global population growth is not the consequence of ncreased birth rates but of an unprecedented decrease in death rate. The 20th century has resulted in victory over famine-related and infant mortality, as well as significant advances in public health and medicine. In the world, five women give birth every second. UN projections show that, in the next 50 years, family planning would be widely used all over the world and birth rate would become universally low. Simultaneously, average life expectancy would reach at least 70 years. Population growth would then start to slow down until it stabilized around the end of the next century. A century from now the world population will probably reach 10 to 15 billion people. Will the world be a nice place to live in? Specialists have mixed opinions. Optimists think that the planet can accommodate a much larger population. Others, more pessimistic, predict catastrophes before ever reaching this number. Researchers have looked for years to find solutions to fight the the overpopulation, but we can†t just except any solutions. Governments can†t just tell the population to stop giving birth, it would be a horrifying reaction from is people. Here are some solutions from researchers that are ethical and unethical. In some countries, particularly Africa, the AIDS epidemic has reached devastating proportions. In the most affected country, Zambia, nearly one in five women of childbearing age is infected. The death rate has already increased by 50%. Eventhough mortality has increased, it has remained less than the birthrate and the population has not decreased. No other country has seen its population decrease because of the AIDS virus, and there is little chance for this to ever happen. There are, however, serious problems concerning the distribution of the earth's goods. But this poor distribution is the result of sin, not overpopulation. Many of the world's calamities and starvation problems are caused by political corruption within Third World countries and a lack of generosity on the part of those individuals and nations with greater abundance. With modern agricultural equipment, adequate food storage facilities, and technology to ensure clean drinking water, Third World countries like India could make great strides in becoming self-sufficient; and developed countries like the United States could help provide these improvements. Many people who support abortion claim overpopulation as a major reason why abortion is not only a right, but a necessity. They claim that because of the enormous amount of people in the world, if all mothers kept their children within their womb, there would not be enough land and food to provide for them. But is this a ethical way of solving problems†¦ Overpopulation is the root cause of all environmental deterioration. Global warming, the ozone hole, rain forest destruction, desertification and all kinds of pollution, weather breakdown, and natural disasters are only signs of this already deadly monster. Population grows exponentially. That is, each generation is a little bigger than the generation before, and so more people have more children, and the next generation is bigger yet. Population grows faster and faster. On the other hand, food production is limited by available farmland, water for irrigation, and so on, and so cannot grow without limit. Food production grows more and more slowly. Therefore, it inevitably follows that as population continues to grow faster while food production grows more slowly, sooner or later population will outstrip food supply, and it just will not be possible to feed all the people. Human societies will always face significant challenges and problems to overcome. New diseases will almost certainly emerge over the next century, as they have ever since human beings began living in large groups. Technological upheaval and change will be the rule rather than the exception. But provided that democracy and freedom continue to spread around the globe, albeit at a sometimes incredibly slow pace, we should expect the 21st century to be a much better place to live to the same degree that the 20th century has been immeasurably better for humans than the 19th century was.

The Journey of Faith - Free Essay Example

Sample details Pages: 5 Words: 1597 Downloads: 5 Date added: 2019/03/22 Category Religion Essay Level High school Tags: Faith Essay Did you like this example? Every story ever told and every life ever lived has included elements of good and evil. In a stereotypical story, the main character endures a struggle between the wicked and the honorable†whether it be internal or external. Through hardships, self-discovery, grit, and strength, the protagonist generally manages to pull off a miracle and rid their respective world of the evil that perverted it. Don’t waste time! Our writers will create an original "The Journey of Faith" essay for you Create order As real people are living out the stories of their life, what is it that separates the good from the bad? The wicked from the righteous? Ultimately, one thing becomes the deciding factor in the conflict between the dark and the light, and that is the faith of the character. Whatever it is that an individual has faith in† whether it is faith in humanity, themselves, people, the world, a single person, or a supreme being of some kind, the choice to have faith or not to have faith determines a persons character. When faith is chosen, it becomes the sledgehammer to smash the face of the evil that keeps popping up back into the hole it came from. True faith is the key to taking the evil out of a person and out of the world. One of the most immediate, innate connections one makes upon hearing the word faith is that with God. God is believed by an incredibly large group of people to be the only one who can change a persons heart and help them become victors over the adversary. Gods role in the internal battle between good and evil is exceptionally shown in a novel written by Yann Martel. In his internationally celebrated book Life of Pi, the main character, Pi, embarks on a life-altering journey that changes his perspective forever. He interacts with different characters and endures treacherous experiences and loneliness that, in any interpretation of the story, become a part of him. Pi is an avidly adamant believer of God, and as he and his actions reiterate constantly throughout the book, Pi knows and loves him deeply and personally. Pis life on a boat in the middle of the Pacific Ocean was not, in any stretch of reality, easy. He described one of his experiences this way, I was giving up. I would have given up†if a voice hadnt made itself heard in my heart. The voice said, I will not die. I refuse it. I will make it through this nightmare. I will beat the odds, as great as they are. I have survived so far, miraculously. Now I will turn miracle into routine. The amazing will be seen every day. I will put in all the work necessary. Yes, so long as God is with me, I will not die. Amen (Patel 148). It is examples like this of Pis faith in and love for God that spread and touched all those who heard his story. One man, Mr. Francis Adirubasamy, introduced Pis experience to the also fictitious author of Pis story by saying, I have a story that will make you believe in God (Patel X). True, unshaken faith is infectious and spreads like the desire for water on a mildly hot day; one doesnt realize they need it until they recognize they dont have it or they see someone else with it. As shown by Mr. Adirubasamy, Pis incredible faith had more of an effect on many than the reality-defying experiences he had. The fact that, above all else, the power of faith was Mr. Adirubasamys main takeaway from Pis story is quite the supporting factor in the argument that Pis faith in God was his key to survival† as well as the triumph over the evil around and inside of him. Although the example of faith shown by Pi is monumentally powerful, the deathly exhibit of what forged faith can do to a person (or a town) is equally as present in the play The Crucible. Written in 1953 by Arthur Miller, this chilling tale follows the havoc-reaped town of Salem as their witch trials commenced in the 1690s. Many people were being accused of witchcraft (the punishment for which is hanging) and terror reigned over the hearts of the residents. Accusations were being thrown left and right as haphazardly as one might throw their clothes out of a drawer in a frantic search for the desired item; however, most of the accusations had very little merit, cause, or evidence to support them. Elizabeth Proctor, a character in the story who was living in Salem at the time, said this, I cannot think the Devil may own a womans soul, Mr. Hale, when she keeps an upright way, as I have. I am a good woman, I know it; and if you believe I may do only good work in the world, and yet be sec retly bound to Satan, then I must tell you, sir, I do not believe it (Miller 70). Elizabeth believes that one cannot make viable accusation of evil against a woman who has done nothing but good works†a show of her personal faith in God. While this prerogative makes logical sense, the town of Salem let fear and false faith control their actions; specifically, they let Abigail Williams, a young girl perceived by many as the living embodiment of deceptive faith, control them. She jumped on the witchcraft accusation bandwagon, shrugging the blame for actual witchcraft off of herself, starting with a slave named Tituba. When confronted about the witchcraft that she herself had performed, Abby said, Now look you. All of you. We danced. And Tituba conjured Ruth Putnams dead sisters. And that is all. And mark this. Let either of you breathe a word, or the edge of a word, about the other things, and I will come to you in the black of some terrible night and I will bring a pointy reckoning that will shudder you. And you know I can do it; I saw Indians smash my dear parents heads on the pillow next to mine, and I have seen some reddish work done at night, and I will make you wish you had never seen the sun go down! (Miller 20) . Abigails threat to the other girls that had seen her perform witchcraft in the woods carried out well and held onto the hearts of the threatened through the rest of the ordeal. Because of this, Abigail was able to wrongly accuse many and start a spark, leading to a metaphorical fire that ultimately killed twenty people† nineteen by hanging and one by torture† all under a false pretense of faith. Young Goodman Brown is another example of the effects of counterfeit faith, but it also delves deeper into the aftermath of the loss of faith. In this classic written by Nathaniel Hawthorne, Goodman Brown is a man who embarks on a journey, despite his wife, Faiths, resistance at his leaving. He ventures into the woods where he meets a strange traveler who is bearing in considerable resemblance to him, though perhaps more in expression than features (Hawthorne). This traveler is later on revealed to be Devil himself, implying that we all have a little bit of evil inside of us. When this older man admonishes him for being late to their meeting, Goodman Brown says that Faith kept me back awhile(Hawthorne). Aside from the fictionalized side of this statement, the screaming symbolism clearly shows that faith keeps one away from evil. It was only when Goodman Brown chose to ignore his faith that he met and conversed with the Devil. As young Goodman Brown and the Devil continued walking dow n the path in the forest, Goodman Brown travelled further and further away from his Faith. Eventually, at a point deep in the woods, he thinks he hears her voice and a scream, shortly followed by a sign implying that she is gone. My Faith is gone! cried he, after one stupefied moment. There is no good on earth; and sin is but a name. Come, devil! For to thee is this world given (Hawthorne). Once faith feels lost, there seems to be no point in resisting evil because one cant feel the good anymore. Therefore, when faith is lost, the individual is lost with it. To analytically summarize, faith has a monumentally incredible power for good if used, gained, and shared correctly. If a forged pretense of faith is used for evil, or if ones faith is lost, it can have the equal, but ruinously opposite effect as true faith. Once one has chosen faith, all actions that follow suit are based off of that choice. Faith, instead of simply becoming a part of someone, becomes the reason behind their existence and the center of their life. As displayed by Pi, true, pure faith has the potential to pull us through the worst of times and give people a reason to, as quoted in Finding Nemo, just keep swimming. If faith is manipulated, relented, or lost (as shown in The Crucible and Young Goodman Brown), the result can be a loss of life† whether that be physically, emotionally, spiritually, or a disastrous mix of all of them. Ultimately, faith is the keystone of a persons decisions and well being. Life without faith is simply fear. Woodrow Kroll, a respected religious leader and previous president of Davis College, once said, The only known antidote to fear is faith. Because wickedness breeds fear, this also suggests that the only known antidote to evil is faith. True faith is the key to taking the evil out of a person and out of the world.