Mr. Jhond,
You are talking about PE again. But I think you should have an open mind to accept new concept, because, the world is changing everyday.
You are right , the historical PE of S&P was never higher than 14 in the past 100 years. But we never have an financial environment like today in the past 100 years, that is why today's PE never follow the pattern of past 100 years. Today, we have internet tradings, investors from everywhere in the world can easily trade MSFT with a click of the key board, which means the unlimited of money is tracing the limit supply of Microsoft's shares. MSFT is a stock all investors in the world is looking at and want to jump in. 50 years ago, we do not have such environment, and Microsoft was pretty much traded in the USA with limit supply of money .
When you look at today's price compared to that of 50 years ago, yes, you will say the PE is too high , however, you did not take the other factors into consideration , which we did not have 50 years ago, the prolong economic expansion, the high
Tech industry which have and will continue to have a major impact on people's life,
the unlimited money supply from allover the world, the continued growth in company's revenues and profit.....etc. That is , you forgot the very big picture, the
technical revolution, and Microsoft is the driving force of it .
When you stand on top of the mountain , you will say the hill beside you is to low, however, when you stand on the top of a small hill, and look at the mountain beside you, you will say the top of the mountain is too high. Well, you can say yesterday's stock price is under value or today's stock price is overvalued, however, you forget one of the most important thing, the value of stock is decided when the stock was traded, it is chnging everyday ,that is , the price people are willing to pay.
The reason the share had a value is because people will like to pay to own the shares.
Why in June 1998, people will not pay $156 per share for Microsoft, but today , they will? because , based on today's economical, and market environment, the investors think that is the value for Microsoft. So, the value of MSFT is not defined by you, or by the PE or analysts, it is by the investors, who would like to pay to own the stock, and the value is decided by the last trading price.
I never watch the CNBC or listen to these self promoted analysts, I just look at the big pictures, and the daily chart, the value of the stock is written on the daily chart .
The analysts or CNBC may impact the short term , but in the long term , it is the big picture and investors ( shown on the chart) drive. I can tell you that , in the past couple of days, big money continued to flow into MSFT, but I do not know where the comney came from.
If you think much of the PE, you probably will think the house in SF is over priced
comparing to the similar house in a small town in the midwest, it is all just concrete and woods. But , you forgot the supply and demand of housings in both market, and the money available to buy houses in both market, and the financial environment in both markets. I can tell you that today is just the start of the big wave of technology
revolution, and we just start, and there a long long way to go in the next 10 years. If you continue to be stubborn about the PE , and buried your head in the sand of historical things, most likely , you will miss the big opportunity. Just record my words, and check back in year 2009.
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