Good post. If the new sheriff in town, named Price Earnings, suddenly is in vogue then a lot of dominate high tech companies have substantial downside to them. You're right about looking through ones portfolio to examine and justify holding stocks that have PE's in triple digits with growth in the 10-30% range. I am talking about the CSCO's, SUNW's, EMC's, etc. Forget the stocks that are valued on a Price/Sales outlook.
As for the PC industry, if MSFT's caution about the industry's growth flatlining comes to fruition, then forget Dell, INTC, CPQ, GTW, IBM, etc. as growth companies in the near term.
The unknown in the valuation scenario, is the amount of buying power that is available for investments. A lot of the blame for the recent and current corrections in the market can be attributed to the Fed contracting the money supply, reigning in the Y2K excesses of late last year. The system at the end of the year was awash with liquidity. Hence the huge mark ups in new IPO's and all tech stocks. Simply a supply and demand situation, an enormous amount of money chasing the supply of stocks.
This year, with money contracting, we are witnessing a lessening demand for stocks. IPO's are withering, rotation in stocks is occurring between the NASDAQ and the DOW.
In my opinion, the only way excessive valuations will remain high and speculation continues, is if an increasing amount of money remains available to invest. The Fed's ramping of interest rates definitely is not contributing to this scenario.
I want to apologize for my response Message 13463075 to your post Message 13462708
At the time, you appeared to be another "drive by shooter" promoting IBM at MSFT's expense.
Regards |
