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Politics : Ask Michael Burke -- Ignore unavailable to you. Want to Upgrade?

To: BGR who wrote (71297)	12/2/1999 3:10:00 PM
From: Michael Bakunin	Read Replies (1) \| Respond to of 132070

..wait ..wait -- you're an indexer, and scoff at the broad US market? That smacks of.. of.. subjective valuation. -g- We can talk about whether or not the NASDAQ deserves its premium to the broad market another time; it has little to do with the equity premium on US stocks. You can argue, I suppose, that buybacks will goose dividend-per-share growth above secular growth. More simply, assume they're tax-advantaged dividends. Say buybacks approximate dividends; cash yield plus buybacks goes to 2.6% -- and your expected return leaps from 6.3% to 7.7%. Looked at corporates lately? Even accounting for the tax advantage of capital gains versus income doesn't push this much higher. -mb

To: BGR who wrote (71297)	12/2/1999 3:12:00 PM
From: benwood	Read Replies (1) \| Respond to of 132070

BRG, I have thought all along that the world paid a premium for growth. I always did. It's just that in the last 5 years or so, the premium itself for any given growth rate has increased rapidly. The metrics for growth have been modified as well, in ways that I believe increase one's risk (i.e. Amazon, the model of the future, especially if they every earn a profit <g>). Thus, the differential between growth stocks and value stocks has widened dramatically in spite of everything. Inevitably, growth stocks become value stocks. It would seem that the chasm that needs to be crossed would involve a whopping decline in the stock price. To me, that's part of the risk that has increased along with the stock price. I think that there is an illusion that risk is inherently lower now because there's the firm belief that there's a never-ending supply of new money to pour into the market -- new small investors and rapid expansion of credit -- and this new money wants growth at any cost. However, I think there will turn out to be a practical limit to the credit, and when it's reached, it won't be pretty. And the risks of paying a 120x multiple for a 40% growth company will be revealed. But probably not until after 2020 <g>.