No Fear In Stocks
Q: "The NASDAQ as a whole is trading above 38x earnings now, a phenomenally high value by all historical and logical standards. The top 10 NASDAQ companies, the biggest and best in the index, all have individually extreme values too. They include MSFT at 30.1x earnings, INTC at 48.4x, CSCO 48.1x, DELL 37.5x, AMGN 36.8x, ORCL 31.0x, QCOM 60.4x, EBAY 108.1x, AMAT with losses, and YHOO trading at 142.3x earnings! The simple average of these elite leaders' valuations is a staggering 60.3x earnings, and they collectively command a market-cap exceeding $1.1t!"
A:
The average Nasdaq stock is definitely trading in the stratosphere.
The S&P 500 on whole seems to be a better deal at 25x earnings. The
P/E seems historically high, but given the current rebound in earnings
and low interest rates, this site's "meter" says it's a pretty good
deal right now compared with the past bubble years.
Those of us
being bid up just that same way housing in California is being bid up beyond
all reasonableness. I live in California and can't afford to buy a house here.
I find it irritating, frustrating and unbearable and plan to leave. When I do,
I'll buy something somewhere affordable. I keep hearing that we're having
employment problems in our country and in our overtaxed state, but if this is
so, who's buying these damn houses and bidding the cost of housing up?
I share your frustration, but as for the stock market, demand (more people
trading stocks via the internet) is driving prices up the same as demand
is driving the housing prices in California. Furthermore, the prices of
stocks might also be skyrocketing as a result of inflation. During
inflationary times, the price of lots of things go up. The hard part of
inflation comes when the average family's cash outlays surpass their revenues.
Maybe another "bubble" is coming, but if real-estate prices (like stock prices)
can be driven up by market forces and never come down, could similar things
happen in the stock market? Does the market HAVE to come down? What if "earnings"
increase after most of the effects of inflation become clear? What if most stock
newbies are making a good profit trading stocks without asking whether the stock
pays dividends? I'm making decent money at it and have only found out recently,
one of the stocks I traded away put dividend money in my account. The dividend
was not enough for me to have regrets over trading the stock away, but I made
money on the trade. Why should I care about this dividend thing?
What I would like to see is the valuations when Nasdaq was at 5000, as
compared to the valuations now. Everybody is talking like this is
1999 all over again when the Nas isn't even half what it used to be at
that time. Weren't valuations about 400 times in early 2000?