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To: MeDroogies who wrote (2323)11/21/2002 3:54:48 PM
From: Kirk ©  Read Replies (1) | Respond to of 4345
 
Hmmm, you have a few apples in the banana bowl

PE of 7 when the 10 yr note is at 14%

vs

PE of 20 when the 10 yr is at 4%

20 at 4 is cheaper than 7 at 14.

As to GDP vs growth... "all" you need to do is grow earnings... productivity has a way of doing that. Still agree you can't grow earnings at 14% "forever" but you can probably do it longer than I will live just by increasing margins and market share.



To: MeDroogies who wrote (2323)11/21/2002 4:08:04 PM
From: Oeconomicus  Read Replies (3) | Respond to of 4345
 
You can't have 8% growth forever. Eventually, you'd be the entire GDP.

In theory, you are correct, but sales growth, which is conceptually more akin to GDP, and earnings growth, more of a driver of valuations, are not necessarily equal, even over long periods. Though I don't have exact figures, earnings on the S&P 500 have grown by about 7% p.a. since 1934 (the end of the early '30s earnings trough, before a sharp recovery in profits).

Bob


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