Bambs- You like to use the term "dumb markets"...
Let me tell you what I think is dumb...Some market observators like to state that today's P/E are way out of line....that, historically, P/E's were much lower...ergo...in the 1960's, a company growing 20% had a P/E of 25, etc....therefore companies (nowadays) should be priced accordingly....I find this extremely naive..
First of all, many positive (for lack of a better word, I'll call them) "conditions" exist today...that did not exist 15,25, 40 years ago....(1) The world is veering unmistakably, albeit with fits and starts, towards capitalism and free trade...think about this.....15-20 years ago, many U.S multinationals had little or no sales prospects in many major countries abroad...including India, China....and for some industries (telecom, others) even Europe....think about how this limited future prospects for growth, the "risk" to these companies to projected future growth rates...etc.....A company projecting 20% future growth (for say, the next 25 years) whose projections INCLUDED international markets (which, most did)...that stream of cash flow was at a much GREATER RISK, IMO, of error...than today.......
By the opening of China, India over the last 10 years....we have effectively doubled (or more) the world's demand for many, many products....
Look at the fall of communism...before 1989...there was limited U.S. activity in much of the Eastern Bloc...sure, U.S. goods found their way in....but, U.S. companies were extremely limited in their ability to set up shop there and expand there as well...
So, ultimately, a company's overall growth prospects were much lower....ceilings on company's ultimate growth barriers are (and should be) set much higher now....are you saying that this should not allow for greater valuations (based on P/E) today?
(2) Fiscal environment: Who would have thought, in 1985, that, by 2000..many SOCIALIST EUROPE GOVERNMENTS would embrace budget surpluses and fiscal responsibility.......(NOT EVEN to speak of this trend in the U.S.)...I shouldn't have to explain to you what this means for European growth and overall world growth for now and the future...and, ultimately, greater sustained profitability for multinationals....
(4) The acceptance of technology as "productivity-enhancing"....are you saying that Coca-Cola's (consumer good) projection of future cash flows are as "secure" (choose your word) as a technology gorilla who is building out a key component of the internet?...my hint: Coke is toast in comparison.....the build-out of the internet is one of the surest things in modern commerce..Until recently, such premises about technology was not widely accepted (certainly not globally), and there were few (if any) "sure thing" (or close) growth industries that would last a decade or more (with hyper-growth)..
Since it is Sunday night, and my wife is yelling at me to get off....I'll stop there....I won't go additional details about a much more responsible Fed (nowadays), the extinction of a "nuclear holocaust (Cold War) scenario, better crises coordination between world bodies (economic or otherwise), the development of deep, liquid capital markets around the world, etc, etc......It was NOT AT ALL a given that communism would fall, and the world would embrace capitalism, that free trade would advance (as it has) 15, 25, 40 years ago...ie........not for one second do I believe the markets were "smart" enough to factor these things in (to P/E's) at that time.........in other words, many major macro "risk" factors (re: future corporate earnings) have been lessened or eliminated.....and the OVERALL growth framework for any multinational (not only tech) has improved greatly in the last decade or so...
This all should be worth something....and it should show up in P/E's (greater, that is)...and it does, IMO..Of course, while some risks have been lessened or eliminated, some other new ones have been created...but NET/NET.....the economic world is a much better place for a fast-growing technology multinational to make a buck and to rapidly expand...and it is only getting better.....and to discount what I am saying is pure folly, IMO...
And so is, IMO, your prediction of a NAZ 2200-2500...and the rest.. |
