Stock prices relative to company assets are no better at signaling the likelihood of future earnings growth than they were the day the Titanic sank, and risk management is a good deal worse.
Sentiment: NEGATIVE
Sometimes it takes longer to create value, but if the companies generate more earnings, the stocks will ultimately reflect that.
Approaches to determining stock values vary, but fundamentally, each company judging itself undervalued is saying that its future stream of earnings justifies a higher price than the stock market is willing to accord it.
With less competition to fear, companies are emboldened to raise their mark-ups and profits. That lifts share prices and thus the wealth of already wealthy shareholders.
Of course, the discounting of future earnings should hurt all stocks. But it should hurt technology stocks more than others, because so many of them are valued at extremely high levels relative to their current earnings.
I think most CEOs think their stock is undervalued, probably.
Shareholders share in the downside and not necessarily in the upside; that's the whole story.
I think you have to learn that there's a company behind every stock, and that there's only one real reason why stocks go up. Companies go from doing poorly to doing well or small companies grow to large companies.
Everyone has the idea of owning good companies. The problem is that they have high prices in relations to assets and earnings, and that takes all of the fun out of the game.
Investors have been too willing to buy stocks with strong reported earnings, even if they do not understand how the earnings are produced.
The more evident it is that a certain company is going to become the market leader in a big market space, then the higher the valuation goes because the risk has been dramatically reduced.