You guy are scaring me.
I get blasted for predicting a 40% return/year. Everyone considers that a ultra-bearish, absurdly pessimistic, predication.
Reality: the long-term average increase in earnings for listed companies is 10%/year. Not coincidentally, that is also the longterm average stock return. Subtract 30% taxes, and you're down to 7%. Subtract inflation, and you're down to 5%. That's what an index stock investor has made, after taxes, in real money, over the last 100 years. According to recent surveys, most stock investors expect to make about 20%/year. The longterm average market PE is 15 (using trailing earnings, which is what everyone used to use). That's average. During recessions (which happen, on average, every 3-4 years), the PE frequently goes to 5. Those surveys also say that investors think stocks are at reasonable valuations today, or perhaps slightly overvalued. There are two possible explanations for why investor's expectations are far higher today than history says they should be:
A) Everything's Different Now, or
B) expectations are far too high
I think the truth is 20% choice A, and 80% choice B.
Now, I don't think QCOM will give me average returns. If I did, I wouldn't have 20% of my money in it, and have limit buy orders to get more if it goes lower. And I believe some of the "New Economy" hype is real (about 20% of it). And I think 40%/year is a fantastic return. And I'm scared that there are still investors holding the stock (who didn't learn anything from the recent bursting bubbles in B2C, biotech, fuel-cell stocks), who will dump it when their unrealistic expectations aren't met.
JS@ithoughtiwasbeingbullish.com |
