For alot of these stocks, the is simply no justification for the high PE's. I agree that the lack of inflation, strength of the economy, and pleasant earnings have been the driving forces behind the market but even they can not justify some of these PE's. I think we are walking a curious tightrope. First, and this is rare, we all know that the FED is going to push interest rates up at the first sign of inflation. Strike one (such as what happened on Friday). Second, though the economy continues to grow, it is growing at a much slower rate now. Question is- are the current stock prices based on the high growth rate of the past? If this is the case, then stock prices should fall to reflect current rates of growth, but then stock prices would be falling in an economy that continues to grow. Its a catch-22 and strike two. I think the entire market has been playing with 2 strikes for the better part of the year, but Im not sure what strike three would be.
This is, of course, my view of the entire market. Individual stocks still have to stand up to individual analysis. In the case of Dell, I think that its current price is based on, or exceeds, the high growth rate of the past. I cant figure out where all the support is coming from, though. Dell shows strength after any kind of dip. It will be curious to see what happens tommrow. Any predicitons for the week?
I try to generally avoid the large threads, such as the main Dell. I just get lost in the 10,000 messages on the thing. Its just too hard to tell who has something reasonable to say and who is just blowing hot air. On these smaller threads, you get to "know" people better, but I suppose that this thread has lost most of its action. |
