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Strategies & Market Trends : The New Economy and its Winners

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To: Lizzie Tudor who wrote (11430)	5/8/2002 8:49:09 PM
From: 16yearcycle	Read Replies (3) of 57684

"what was the historic P/S? I was thinking 7, pre-bubble." Lizzie, first we would need to decide when the bubble started: stockcharts.com[w,a]waclyiay[pb50!b200!f][vc60][iUb14!Uk14!Ul14!La12,26,9!Lf!Lc20]&pref=G This is a chart of the ratio I discussed before. The nasdaq averages about 1/5 the price of the dow long term. Although many want to believe that the bubble started long ago, I don't think a bubble existed until around the time that the nasdaq broke to an all time low ratio vs. the dow, and that wasn't until Nov 1998. And that ratio still wasn't too out of line until just after April 1999. So if we assume the dow wasn't overpriced in Nov 1998, we would have to say that the nasdaq wasn't either. (In retrospect the dow was only selling at 17x 2000 earnings). Ok, so BEFORE 11/98, what was the historic ps ratio on LEADING sw companies. I have gone back and I get 8-12. The bubble got companies well over 20. 1 to 2 is insanity. There is no other word for it. These companies have tremendous margins and roe.

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