When will they learn?

Quite the prescient page 1 article in WSJ today: Tech-Stock Surge Brings Back A Hint of the Late-1990s Frenzy.

The article was written before todays INTC news.

At the open, the market gapped up hard, only to give most of it back; The S&P went negative, by 10:30, the Dow gave most of its gains (its plus 12 as I type this). Nasdaq remains the strongest index.

Take at look at the chart from E.S. Browning’s article:

forward PE.gif

I’m reminded of a terrific quote from one of my favorite writers:

“Human beings, who are almost unique in having the ability to learn from the experience of others, are also remarkable for their apparent disinclination to do so.”
Douglas Adams


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  1. Yasser commented on Aug 23

    “Earnings” is such a nebulous concept that it’s difficult to put much faith in P/E ratios. Should the cost of stock options be deducted from earnings? Probably. But Black-Scholes isn’t an appropriate pricing model for employee stock options because of its heavy emphasis on implied volatility. And lest we forget, shifty accounting and the malleability of GAAP allow managers to obfuscate the “true” earnings of a company.

    In any case, I thought finance theory said nothing about earnings; the value of a company is the present value of future *dividends*, right?

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