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Technology Stocks : Amazon.com, Inc. (AMZN)
AMZN 244.25-2.0%3:59 PM EST
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To: Robert Rose who wrote (103633)5/19/2000 2:03:00 PM
From: GST   of 164684
 
<Don't you believe that over the LT, equity growth tracks real economic growth? (serious question)> In a very general sense -- yes. But there are cycles. I can remember in the mid-90s when INTC traded at an 11 p/e ratio. A very substantial amount of stock value growth is nothing more than an expansion of the multiples people have been willing to pay for stocks. In a falling interest rate environment this makes sense -- in a rising interest rate environment it is stupid. The stock market is way behind the curve in accounting for a series of interest rate increases -- and it is not over yet. We can easily see the market go down another 50% from here -- a reversion to the long-term trend. And from there it can grow at 7% a year and only get back to today's levels by the year 2010 -- all without violating the essence of what you are saying. In the meantime, a lousy 7% return on bonds will double your money. All of this assumes you are lucky, and not stupid enough to buy big-time into the "new economy" stocks, which promise unlimited growth but face equally high probability a bankruptcy and unforgiving multiple compression -- bearish enough for you? But very reasonable. I have not even discussed recession. You want to buy economic growth? Buy GM.
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