Bob Brinker: Market Savant & Radio Host Message Board

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Strategies & Market Trends : Bob Brinker: Market Savant & Radio Host

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To: Alan Whirlwind who wrote (4407)	4/1/1998 10:38:00 AM
From: Kirk ©	Read Replies (1) of 42834

Considering market value as a % of the economy, since 1925 the market has grown on average by approximately half the value of the economy. The market has had a disturbing tendancy to crash when the number has exceeded 70%. It is now 154%. What other market in recent times has become so overvalued? Japan, 1989. Fascinating post, Alan. So much has changed that I wonder if we are comparing apples to oranges somewhat? For example, I remember the 80's when companies were being bought up for their assets that were completely depreciated. There were all these family businesses with land that had zero book value. Larger companies would buy these smaller ones, sell many of the assets and get rich at the expense of lost jobs. This has led to our concentration on ROA or "Return on Assets" where CEO's have to make sure they utilize their assets or they will be gone. I think this had the effect of bringing in alot of assets into the S&P500 valuation. I am still not sure if we carry the building I work in at a depreciated purchase price or at its market value. Since it is in the Silicon Valley, the difference might be 10 to 1. Also, I know many companies sell their buildings then lease them back as this makes more economic sense. Maybe this doesn't amount to a hill of beans, but it does illustrate that how a company is valued by the market has certainly changed. Also, in the '50s, companies might have been valued for their ability to pay an increasing dividend. Now they are valued on how well they can grow from a market of maybe 200Million in the US to several billion worldwide. Clearly, Msft has the easiest growth path as they just ship a CD and charge $80 so they get the astronomical valuation. anyway, time to make better use of my companies assets.....i.e. get back to work! regards Kirk out PS My heart missed 4 or 5 beats with your great joke!

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