who thinks this is start of major correction, page-49

Clark
If you think a company is based purely on its p/e then you are more of a gimp than I first thought.


What I am referring to is risk levels , liquidity and forward projections on economic growth.

Risk Levels - as soon as a bubble is popped people's tolerance to risk is lower, and therefore a share price will drop regardless of the company f/a because a risk premium is now added. Will you just sit back all ho-hum as the share price drops 30% and not sell based on a p/e? Do you think everyone else will do this?

Liquidity - Supply/demand if funds start to liquidate positions in order to meet higher margin repayments do you really think they will care what a p/e is? Do you think the other funds will be able to mop up the excess stock when they are experiencing the same tightening in liquidity?

Economic Growth - p/e is based on current earnings. Are these earnings going to be the same in 24 months?

Were p/e's correctly priced throughout the recent bear run?

It is common sense that at the top p/e's will be over shot and at the bottom p/es will be undershot. Otherwise the market would move in a straight line from a to b and this is not human nature.


You amaze me with your old man views o' Clarky. As I said, was thinking of you when the dow dropped over 600pts in 2 nights. Oh and of course this drop was all p/e related wasnt it?


Forward earnings taken into account? The US (sp500) has had its worst quaterly profits for 16 1/4's. Sure the p/e may be correct at the moment , but doesnt this signal a contraction in growth for the future? If I told you what a p/e would be in 12 months would you sell a stock today if it happened to be lower?