Silicon Investor (SI) -- The First Internet Community

STOCKTALK

We've detected that you're using an ad content blocking browser plug-in or feature. Ads provide a critical source of revenue to the continued operation of Silicon Investor. We ask that you disable ad blocking while on Silicon Investor in the best interests of our community. If you are not using an ad blocker but are still receiving this message, make sure your browser's tracking protection is set to the 'standard' level.

Politics : Idea Of The Day -- Ignore unavailable to you. Want to Upgrade?

To: IQBAL LATIF who wrote (30217)	12/25/1999 10:29:00 PM
From: Riskmgmt	Read Replies (1) \| Respond to of 50167

Ike and thread: I hate to interrupt the fighting to post something constructive that may put money in our pockets but lets say, it's just a character flaw. <ggg> I read a book that reminded me of you, Ike and your point of view on the U.S. stock market. I highly recommend it. Book: Dow 36,000 by James K. Glassman and Kevin A. Hassett. The authors question the validity of the current yardstick used to arrive at stock values and by extension the stock market as a whole, what they refer to as the "perfectly reasonable price" or PRP. They argue that "too high" being a relative term is used by Wall Street and the media for a stock price RELATIVE to the historical P/E ratio. The authors suggest that this is meaningless if, as they set out to show, stocks have ALWAYS BEEN UNVALUED. The argument is based on the fact that a risk premium has been built into stocks as they have been (incorrectly) viewed as riskier than bonds. In fact, the authors suggest stocks long term are as safe or safer than bonds. To arrive at the PRP for a stock one has to look at the cash it puts into the pocket. They postulate that even with growth companies that pay no dividend the investor owns the company and so at some point in time will get a cash distribution. The bottom line is that when you factor in estimated growth, stocks are cheap. The Dow was at 9000 when they wrote the book and they suggest that for stocks to be correctly reflective of PRP versus bonds, the Dow would have to be at 3600. They caution not to expect this to happen overnight but a paradigm shift will occur sometime in the next 5 years. I liked the book as the authors kept it simple and easy to follow. I would highly recommend it to all investors in stocks. BTW.To anyone reading this. I have no financial interest in the success or failure of this book. This is JMHO please use DD and draw your own conclusions. regards, Ray