Jeff: I am still trying to get a sense of how much a Y2K stock bull thinks one should pay today for one time, not repeatable, earnings in the future. I am being generous and saying one times those earnings, but really, anyone with any sense would pay less.
Let me try an example: How much will you pay me today for $10,000 that I promise to give you in the year 1999? I'm not sure what your answer will be, but it will no doubt be less than $10,000 depending on what you think the chances are that I might not be able to pay and what kind of return you expect to get on the money you front me. Because that is what the Y2K's companies' earnings will be - one shot (or two shot, if each year = one shot) deals, worth less than one times face value.
Now, if I said, what would you pay me in return for a fifty year stream of earnings, starting out at $10,000 in 1999 and going up at X%(whatever) per year, then that figure may well be huge.
You say that you are confident that these companies will figure out what to do for a living in three years and they will certainly make lots of money at it. So you are willing to pay a high multiple of earnings to be realized from businesses that people haven't even thought up yet.
If you want to do that, fine, but I don't. When does blind faith become delusion?
As to the strong versus the weak, no getting around the fact that Y2K business (and more important, margins) for even the strongest will start collapsing within a few quarters of 1/1/00. Given that their earnings are likely to be small relative to their current stock prices, the cash positions of the strongest companies won't be able to hold up their prices much.
I am not disagreeing that many have strong momentum now, and I am not yet short any of them. But just as the stocks have been going up for a while now way ahead of any big earnings showing up, they will start dropping well before 1/1/00 in anticipation of the coming collapse in earnings. So it is just a question of timing when the tide will turn. |
