Tulipomania Blowoff Contest: Why and When will it end? Message Board

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Non-Tech : Tulipomania Blowoff Contest: Why and When will it end?

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Jun 26 5:00 PM EST

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To: Mad2 who wrote (3396)	3/13/2001 6:58:49 PM
From: sea_biscuit	Read Replies (2) of 3543

The PE of the Dow at the bottom in 1932 was higher than the PE at the top in 1929. So going by PEs alone, the Dow should have continued to decline because at the bottom it was more overvalued than at the top! PE ratios are not reliable indicators as earnings plummet. Another way of looking at it is -- suppose we have a business that is breaking even, i.e. no profit, no loss. Its PE ratio is infinity no matter what the price! So what is the company worth -- nothing? Should it be given away for free?

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