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I think the main reason we still have high P/Es is because the valuation methods of entire sectors like telecommunications, software, and the Net must be different. No one expected Microsoft's PE to be this lofty for so long, and the same could be said for Cisco, and lots of others. Yet over the years the real worth of those shares has appreciated far in excess of their growth rates, a phenomena we really haven't seen before. Even Greenspan admits that there's something to this "new economy." That's not to say there is no wisdom in rightly refuting the old saw, "this time it's different." Like it or not, the United States has a total lock on the sectors that will drive the global economy in the next century--telecommunications, software, semis, the Net, banking, pharmaceuticals. Notice that these tend to be the sectors with the high P/Es. It's because they deserve to be high. People have been saying they're too high in all those great companies for at least a decade, and they've been wrong for a decade. And will almost certainly be wrong in the future if they continue diss those sectors as overbought. |
