Go to Jeff Salisbury LWGate Home Page.From: "zillagirl" <zillagirl@email.msn.com>
Subject: Re: [CANSLIM] Cheap?
Date: Mon, 29 Jul 2002 17:38:01 -0700
Previous Article (by Author): Re: [CANSLIM] question "rolf hertenstein"
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I just saw Bill O'neil on T.V. and I believe he said that historically P.E. does tend to go up and that he would think that a P.E. in the low 20's is reasonable. If he is correct I would think that gives us a little breather, although he did say he didn't put that much in stock in P.E. ratios. - ----- Original Message ----- From: <Spencer48@aol.com> To: <canslim@lists.xmission.com> Sent: Wednesday, July 17, 2002 11:08 AM Subject: Re: [CANSLIM] Cheap? > zillagirl: > > Interesting observation. I see PE's as being historically > comparable-despite fewer buyers in the past than now-because: PE's are > ratios. The price will go up as demand (buying) increases. However, > earnings (the denominator) will also reflect history's marching-on. Thus, > despite prices increasing, earnings will also increase (whether due to > inflation or productivity increases which lead to real profit growth). Now > if they both increase equivalently-compared to what they were in the > past-PE's should stay the same. > > I believe (I have no evidence of this, nor would I know how to get it) > earnings have increased equivalently with price. The reason I believe this > is that stock prices are based on earnings, and based on realistic and > reputable projections of earnings, investors will buy the stock. This will > cause the price of the stock to rise-but only because investors now see that > earnings will rise (which, if fact, they have). > > The reason why the PE's are comparable (from one era to another) is > because investors psychology does not change-they will always buy, so long as > they believe the earnings merit that the stock should be bought. > > jans (Assuming my answer is-in part-correct, does this mean that "my mind is > smarter" than zillagirls? My vote is "No"-for I wouldn't even [and history > proves this] have thought up the question.) > > > > In a message dated 7/16/2002 11:16:25 PM Eastern Daylight Time, "zillagirl" > <zillagirl@email.msn.com> writes: > > I have a question for minds that are smarter then my own. When we look at > price to earnings, don't we have to consider the number of people investing > in the market today over what it was in the past. I've read > historically -that in the past- 10 to 15% of households were involved in the > stock market. Now I've seen figures of 50% or more. If 35% more > American households started putting money in the same 10,000 or so stocks > that existed before-it seems like that would drive up the price, even if the > business was no more profitable or productive then before.(supply and > demand). Possible even keeping the price up if these households kept > investing(higher P/E ratios) Hence maybe it would be unrealistic to > think that the correct P/E for this point in time should be exactly in line > with the correct P/Es of the past. Unless of course that extra 35% of the > people got out of the market again. Kind of like saying-the > babyboomers are here and our mind tells us that we need many more retirement > homes- but historically, over the past 75 years, 2 retirement homes per city > have been the norm so that is the figure we will stick with. If this > theory sounds reasonable-it would certainly take some of the fright out of > those charts. >> > > - > -To subscribe/unsubscribe, email "majordomo@xmission.com" > -In the email body, write "subscribe canslim" or > -"unsubscribe canslim". Do not use quotes in your email. > - - - -To subscribe/unsubscribe, email "majordomo@xmission.com" - -In the email body, write "subscribe canslim" or - -"unsubscribe canslim". Do not use quotes in your email.
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