I believe we also need to include the inflation of stock's PE
in the recent years into consideration. The people have been
spoiled by the recent years of booming in the stock market,
and the money is pouring into the market at an increasing rate
annually. The inflation of stock prices is the by-product of
this phenomenon and is becoming a more important factor to
affect the future PE of stocks. Without putting this factor
into calculating, there is no other way to justify the high
PE ratios given to most of the internet stocks.
Although there is no easy way to formulate this human factor
into simple equations, we can not ignore this factor at this
moment unfortunately. From my perspective, the high PE for
the internet stocks is spreading from pure internet stocks
to the telcom and datacom industries, and it is gradually
expanding to some of the semi companies that provide the
communication related chips. I believe as long as the bull
market is still running, there is no reason not to accept
a high PE for an internet related stock even for TXN,
ALTR and XLNX.
I also agree discipline is very fundamental. However, the
discipline is only useful when it is based on a good system
with a solid foundation. A system, even though it is working
perfectly in the last 20 years, is not good enough if it
does not include the human factor into consideration.
For instance, a people without good discipline bought XLNX
at 150.00 in 95 is still making good money (with 80% gain).
Is it due to the annual growth of XLNX, or is it due to the
inflation of valuation of stocks. I believer the latter one
is playing a more important role in the last 6 months than
anything else.
If you think XLNX should be avoided at this moment, than it
is equivalent to you are predicting the ending of the BULL
market. However, is it really true that the BULL market is
going to an END.
Lucinos |
