Have Economic Fundamentals Really Changed?

Gailliot, Henry
February 1996
Journal of Financial Planning;Feb1996, Vol. 9 Issue 1, p54
Academic Journal
The article focuses on investment economics. Anyone who was an investor in 1980,1972, or 1968 cannot possibly look at what is happening today without understanding what it is. What is unclear is what the trigger will be, when, and under what circumstances. There was no obvious trigger for oil, for the company Nifty Fifty, or for technology at the time. In hindsight, it was perfectly clear that this bubble had to burst. Today it is obvious to 99 percent of the participants that 6000 Dow is a chip shot for 1996. A forecast of 10,000 on the Dow without an intervening bear market does not even get one a headline in a investment magazine because too many people are making the forecast. The P/Es on the billion-dollar-cap concept companies have reached levels that have never been seen in this country. Netscape sells at 450 times its next year's earnings and it is a multi-billion dollar company. In the prior bubbles, 100-plus prospective earnings seem to be about where people stopped.


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