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.

Technology Stocks : Intel Corporation (INTC) -- Ignore unavailable to you. Want to Upgrade?

To: wanna_bmw who wrote (153457)	1/2/2002 12:28:27 PM
From: GVTucker	Read Replies (1) \| Respond to of 186894

wanna bmw, RE: Show me where in history that the Nasdaq has taken an 80% drop, the Dow a 40% drop, and the S&P a 50% drop from their record numbers over a two year period. There has never been any historical correlation between a previous period's performance and a future period's performance. And I see no logical reason why one should start now. The performance of the various indexes in 2000 and 2001 are irrelevant to me. That said, given that the Nasdaq has only existed for 30 years, it isn't surprising that we have no historical precedent for the Nasdaq's recent performance. The data set is just too small. Flip that around a touch and you'll see why it doesn't matter. From spring 1997 to spring 1999, the Nasdaq rose about 125%. Such a two year performance was unprecedented. That didn't prevent the Nasdaq from rising a further 90% over the subsequent two years, creating an unprecedented four year performance record. Valuations be damned Such an attitude cost many people a lot of money over the past two years, including Intel investors. Don't make the same mistake twice. No, I am not advocating a simple buy the low PE sell the high PE strategy. It's slightly more complex than that. Yet when you look at overall indexes and not individual stocks, PE has been the best predictor of future performance that we have. Now you're trying to tell me that things could get worse, just because of historical valuations in the 70's and 80's, like those valuations could return out of the blue? And you think that the economy could survive that kind of a fall, should it occur? No, I am telling you that THINGS DON'T HAVE TO GET WORSE FOR THE MARKET TO DECLINE. Forget the valuations of the 70's or early 80's. Look at valuations at any other time. If you think that earnings will recover significantly, look at valuations for the market at earnings troughs. You still can't get close to the current valuation of the market. If things did indeed get worse, if interest rates rose and the dollar declined, then we could see valuations of the 70's and 80's. The economy survived just fine back then. If that happened again, it could survive. What do I think will happen? As I have said a few times, I think that the highest probability event is a stagnant market for an extended period of time. Dow 10,000 will be similar to Dow 1,000. It took the market 11 years for Dow 1,000 to be crossed for good. Maybe it takes 7 years for Dow 10,000 to be crossed for good as earnings grow into the current valuation. Every year my brother and I exchange guesses for various indicators in the market, equity, fixed income, and commodity. Last year my guess for the Dow was 9750, a modest drop. I was pretty close. My guess for 2002 isn't too far away from the current market levels.