This thread fills a current perceived need on my part if I may expand it ever so slightly. I have heard posters blame Al, the president, Cheney, the republicans, the democrats, etc. whenever the price of a stock goes down. But what really gets my goat is the demand that the CEO "do something about it". The Yahoo LWIN thread has had any number of posters calling on Harvey White to get on the news and tell the world how wrong the price is. I don't recall many calls for him to do the same when the price was $109.00 but I'm sure the same people wanted the truth to be told then also.
Since when does my decision to accept Johnson and Johnson stock at a PE of 30 cause the CEO to have a responsibility to maintain the price at 30PE or more from then on out. Even if it did, would then he also be obligated to defend the price of 31 times earnings bid by the next buyer and so on for as long as we chose to bid the price up?
When I bid a stock up to a PE of 25, it means I am satisfied with a current return of 4% on my money, that I have evaluated the growth and it is sufficient for that 4% to reach my marginal investment return, and since most of the other people investing think they should have over 10% return, I have to know that at any moment they may all decide they want the current return to come from earnings rather than a greater fool, thus refusing to pay more than 10 times current earnings for my shares. The CEO, Greenspan, Bush, and the Dallas Cowboy cheerleaders have nothing to do with the sudden fact that my shares will only sell at 40% of what I paid for them.
Thanks for giving me a place to spew. Tried it on the Yahoo JNJ thread and all I got was that I was too simple using PE and that one has to take into account GRRRowth. Of course the thread indicates it is I who am the mindless zombie as I post here. Somehow I don't think there will be a lot of those people who blame xxxxx for stock prices showing up here to vent, so you'll have to take what you can get.
Best regards, Lance |
