Umbro, The problem is that the "history" you cited coincides with the greatest bull market in technology crapola ever. If we are still in that underlying tech mania, and what we are seeing now is just a blip to long term trends, then your valuation markers make sense. However, if we go back to other historical periods when tech was out of favor and not number 1 in investors' minds, as it is now, we would find a different story. The problem is, you cannot draw direct comparison to the stocks on your table because most of the tech leaders in the 1960s no longer exist. Ditto for those who got hit by the Carter malaise in the late 1970s. Or by the Reagan recession of 1981-1982 (why all existing tech stocks quote their prices from 1982 <g>). Or the mini-bear of 1987 or the doldrums of 1989-1991. The pe ratios shrink tremendously and many of the leaders of the 1988-1989 recovery have yet to recover. I don't know if anyone else is old enough to remember how big Novell and Autodesk were in those days, but they were hot and names like Oracle and Sun were just getting started.
Also, the pe ratio comparison ignores the fact that earnings are not carved in stone for these or any other cos. Earnings can and do go DOWN during recessions.
True, a few of the older cos. will do well during the recession. And a few new cos. will emerge as mighty heroes in most industries, even in the tech sector (and I am always on the lookout for those). But if this is a bear market, prices can and probably will fall MUCH further to wash this underlying optimism out of investors.
best, MB |
