--- Christian Gregory <christian11 at mindspring.com>
wrote: >
> > Doug Henwood wrote:
> >
> > >Stocks are priced for a recovery in profitability
> >
>
> By the way, what is the formula for figuring how how
> the price of a stock
> predicts or anticipates profits--I mean, in real
> number terms? How is the
> price or market capitalization related to earnings
> expectations?
Hope, self-delusion, fear...
There's a long term trend that stocks tend towards. It's based upon Price Earnings ratio, and I forget what it is exactly, but I think it's around 12. Don't know what it is at the moment, but it's a lot higher than that. As earnings fall...
Of course in reality the price of stocks has more to do with the the more money that flows into the market, than any underlying value of the stocks. In Britain most of the money is tied up in pension funds. Which should be interesting when the baby boomers retire...
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