<<In retrospect we most likely shall see a comparative few wanted out. As we shall most likely see that they were had.>>
Duncan, here is a bit of rambling on my part, explaining in more detail my less than sanguine views about the future and the reason why I like CISCO.
Overall, I'm having trouble seeing sustained earnings growth in companies at a level sufficient to support these multiples. The US has essentially conquered the world without firing a shot. This has resulted in a cheapening of their currencies and there is much more of this to come in the future.
Long term, a too-strong dollar is not a friend of American business, and it is being kept at these relatively low levels by sophisticated financial fraud of the central banks. The strong dollar makes our exports less competitive and, more importantly, limits the amount we earn from what we can sell. Eventually, the dollar will erupt upwards and we will then see central banks/markets impose stronger artificial limits on currency speculation.
The removal of that discipline imposed by the speculators will, ironically, lessen the need of foreign governments to bring their economies in line with free market models that promote growth. Other factors limiting US growth will be (1)the further consolidation of Europe into a closed trading block, (2)the resentment of all of our trading partners which will make it more expensive for American companies to do business in their markets (3) increasing costs for skilled US labor in our tech industry and the deflationary effect on the US if their options implode.
One of the reasons I like Cisco is that it does seem to sell an essential product/service that might be a bit immune to this overall trend that will lessen profit margins. But three years from now, I would be shocked (pleasantly) if the stock was trading at a sustainable 138, a 20% growth rate from today's 80 point.
Realistically, if growth increases at a 10% clip in US dollars in the future, it will be pretty good. That level of lower growth just doesn't support this stock price, and most US companies do not have the favorable fundamentals of CISCO.
Regards,
LordDarley |
