Yes , it did not hit $200, but $190!! Just $10 short , not bad. But , your prediction
was just completely off !!!
Yes, fundamental is very important, but the stock market is more than fundamental.
The market is driven by money, more people want to buy, less people want to sell, then it creats an unbalance. Microsoft is a stock of the world, and it is driven by money coming from all over the world, so you can not predict the price of MSFT purly by fundamental. Another factor which dries the market is psychology, i.e the potential of the future. That is new products release, strategy planing for the future e-commerce business ...etc, all these creat an expectation of potential of this company. Just like those internet stocks, what drive these stocks ? Future expectation , and the flood of money in the market. As money is flooded in the market, the PE goes up. So, how high is high about PE ? and how low is low ? It all depends how much money is available in the market . Relatively speaking, the PE of MSFT
is low comparing to other stocks in today's market environment where money is everywhere.
As to the interest, AG talk about rate hike ever since 1998 , and the analysts talked about this all the time to frighten the small investors. The question is do we really have room to hike the rate , is the relative rate is already too high comparing to other countries ? Do not forget, today, we are competing in the global market , the high rate will hurt the US companies in the world market , as a result the economy. Say, in Japan, the cost of money is 3% , while in US is about %5 to %7, so relatively , US 's
rate is already too high comparing to Japan, then How can the US companies compete with Japanese companies in the world market . Secondly, to control the demand by rate is based on the assumption that the productivity will not improve anymore, which means the supply will not increaase anymore. However, as you know that is not the case as Hi Tech set in to improve the productivity all the time, i.e
the supply will continues to increase with a fixed cost. So, it is the demand, supply
which control the price of products, The way to control the inflation is to improve the productivity all the time and encourage unlimit consumption, Not cut demand by hiking the rate , which will hurt the economy and the people.
Finally, do not expect the US economy can prosper alone if others are in a serious recession. The hike of rate will reduce the demand of US products from other countries, as a result backfire, and which will induce a chain reaction.
As to the presidential election , well, I do not think Clinton will do anything to hurt the economy , as a result hurt the people if he wants Gore to win the election of year 2000. |
