PaperChase, you seem to have forgotten history. By any historical measure, like the P/E ratios of the indexes, this stock market is the most overpriced stock bubble in U.S. history. The Nasdaq 100 index, for example, has a P/E almost double what Japan's Nikkei index had when their stock bubble started to pop in early 1990. All speculative stock market bubbles eventually pop. Of course, no one can accurately predict when that will happen.
Don't even get me started on insanely overpriced Internet stocks. You even have companies with market caps that are both over a billion dollars and more than 500 times annual revenues ! (And most of these companies don't have profits, only losses.) For example, take a look at financialweb.com
No company in history has ever grown fast enough to make those kinds of numbers seem like a bargain when buying their stock! You should read the new book "The Internet Bubble : Inside the Overvalued World of High-Tech Stocks--And What You Need to Know to Avoid the Coming Shakeout" by Anthony Perkins and Michael Perkins, who created "Red Herring" magazine, --the-- magazine for investing in technology.
So, here's my stock predictions, for sometime in the near future:
* Stock prices will collapse, like they have in the past. After the Crash of 1929, some stock prices lost 80-90% of their value in a period of several months.
* Many people who bought stocks on margin are going to get wiped out. If a stock price drops 15% below what you bought it for, you will get a margin call asking for more money. The usual response from most people in such a situation is to sell, forcing the stock price down even further. Trying to sell a stock when it is declining is not easy.
* A lot of people will not be able to sell a popular stock, such as EBAY, AMZN, etc., at anywhere near what they bought if for, if the price suddenly drops. The usual scenario when a stock drops in price is that there is a shortage of buyers, and people get desperate enough to take any price they can get in order to sell the stock. |
