Re: The Politics of Recession

[Sven R Larson <larson@xxxxxx>]

"John M. Legge" wrote:
>
> Sven,
>
> I don't know how far the "new economy" stack prices must fall to become
> bargains, put it could be a long way.  I value Amazon at under $3: it is
> still trading at over $11.  Henry passed me some analysis suggesting that
> Cisco is worth no more than $5: it is currently $38 and rising.  Microsoft
> is $40 with a p/e of 22 and a friend in the White House; but if they start
> paying their senior staff in money instead of share options there won't be
> much profit left over unless they lay off lots of people in which case there
> will be no growth left over.  Say "fully valued" at $20 - $25.
>
> Bargain hunting may soften the crash but I doubt if it can avert it,

John,

The use of p/e ratios to estimate stock prices has since long proven to
be inadequate. It's more important to forecast how much cash that will
flow in to the stock market, and here I believe the American economy may
be in trouble, more so than the European. Many EU countries have
implemented tax cuts or have such plans pending, and the combined effect
can be significant on the financial markets.


/srl

--
Sven R Larson
PhD; Assistant professor of economics
Department of Social Sciences, Bldg. 22.2
Roskilde University
Pb 260
DK-4000 Roskilde, Denmark
Phone: (+45) 4674 2910