While I hope SpaceX goes public at some point, I don't think it would be good at this point. Too many cooks...
What SpaceX really needs is a strong lobbying group to counter the growing anti-SapceX lobbying in government by ULA and it's cronies!
SpaceX is going up against some very powerful people that control many hundreds of billions of dollars. They are already trying to sick the government oversight police on them for launch delays.
While I hope SpaceX goes public at some point, I don't think it would be good at this point. Too many cooks...
Indeed. I think they need to be further along in their design and construction stages of both the manned Dragon and the Mars Colonial Transporter before they go public. They need to have a manned Dragon built and successfully launched once and the designs and specs for the MCT finished. Then they should hit up the stock market for funding to do the latter.
Amazon is, indeed, ridiculously valued. When there are thousands of stocks traded, there are always outliers here as anywhere else (Tesla is another one, IMHO).
A few examples like that do not necessarily extrapolate to irrationality in relation to the market as a whole, or to relatively more mature businesses.
I'm not saying that the entire market is irrational, but it isn't exactly logical either.
All financial formulary for valuations are ad hoc. It's decided that one thing or the other means something, and is given a value. But all of that is just assumed to mean what it means. There is no "natural" P/E, for example. It's just decided that a particular P/E is appropriate for an industry. I and whatever the actual P/E is is assumed to be "right". But that's nonsense. It's all just feelings that something is right.
Amazon's PE is justified by the present value of future cash flows.
Its justified by assuming Amazon will grow revenue by 500% in the next 10 years (basically the size of Walmart) and then increase prices by 2-3%. Then it will generate profits that will move the PE to 30.
Are those assumptions realistic? I say no.
Now, that is nonsense! The reason why Amazon is priced where it is is simple. Bezos has convinced Wall Street that someday soon, Amazon will be making big profits. That's pretty much all it is. Once it's understood that it's impossible, going by their business model, the heyday of Amazon's stock price will be over.
If it moves P/E to 30, then the stock will plummet. At about a P/E of 830 now, and a stock price of about $330, that will leave investors hanging off a cliff. If the stock remained where it is now, while those sales and profits ballooned, then it might work, as the P/E slowly dropped. But the stock could continue going up during this time, whereupon, it would crash.
Going by any normal standard, Amazon should be no more that 30 now. It's a retailer, mostly, with unprofitable hardware lines, and generally, no profit. So the stock could be fairly priced at $15.
Indeed. I think they need to be further along in their design and construction stages of both the manned Dragon and the Mars Colonial Transporter before they go public. They need to have a manned Dragon built and successfully launched once and the designs and specs for the MCT finished. Then they should hit up the stock market for funding to do the latter.
We can forget the Mars transporter. There is no evidence that people can survive a trip to Mars. The interplanetary radiation is so intense that no normal ship could carry people in safety.
Two of the ideas being thought about are either too difficult, too expensive, too dangerous in their own right, or all three.
One idea is to encase the life module in 10,000 tons of ice to absorb the radiation. The second is to develop a magnetic field around the ship similar to the one Earth has, to bend radiation around the module.
The first would require a power source for the engine too big to be practical. Also, getting that much ice around the ship would be extremely difficult.
The second is also very expensive, and secondary radiation from the generation of the field itself could kill the passengers.
Until they solve this problem, all talk of Mars is just talk.
I'm not saying that the entire market is irrational, but it isn't exactly logical either.
All financial formulary for valuations are ad hoc. It's decided that one thing or the other means something, and is given a value. But all of that is just assumed to mean what it means. There is no "natural" P/E, for example. It's just decided that a particular P/E is appropriate for an industry. I and whatever the actual P/E is is assumed to be "right". But that's nonsense. It's all just feelings that something is right.
While I agree that there is 'no natural PE' and that 'appropriate' PEs can vary by industry, it is far from an ad hoc formula. Indeed, it has a rather precise meaning, couched in two specific fundamentals: the return expected from the stock (which is based on its risk), and the expected long-run growth rate in earnings.
Let me explain with some simple algebra. (I will make some simplifying assumptions without any loss of generality). Assume that the Earnings (E) of a company equal its cash flows. Call the forecasted earnings for Year as1 E1, for Year 2 as E2, etc., and call the expected return on the stock 'R'.
The Price of the stock (i.e., the earnings capitalized) today is then just:
P = [E1÷(1+R)] + [E2÷(1+R)2] + [E3÷(1+R)3] + ........ ?
Now, assume that investors can forecast (ex-post rightly or wrongly) E1. While we can certainly agree that there is no reasonable way to forecast E2, E3, etc., assume that investors (or analysts) can come up with an estimate of the long-run annual expected growth rate in earnings. Let's call it G. The formula above (applying some basic algebra) then becomes:
(Of course, the P/E1 is what we call the forward price-earnings ratio.)
Thus, when we use the term 'PE ratio', we are implicitly making a statement about a stock's perceived risk (the higher the risk for a given level of earnings, the lower the PE), and its earnings growth rate (the higher that number for a given level of earnings, the higher the PE -- from whence comes the notion that 'high-growth stocks have higher PEs').
Thus, when we're using a PE ratio as an indicator to buy a share we are implicitly making an assumption about its risks and growth. If we're buying it at the current PE, we're essentially saying that we're making a bet that its risk is lower than what the market currently thinks it is, and/or its earnings growth will be higher than what the market thinks it currently is.
(PS: I am not making any of this up; it can be found in most finance textbooks).
We can forget the Mars transporter. There is no evidence that people can survive a trip to Mars. The interplanetary radiation is so intense that no normal ship could carry people in safety.
You have to be joking. It’s not the ‘40s. The Van Allen belts won’t kill us all. A trip to Mars is less dangerous than smoking for 20 years. You would reduce a person’s chance of getting cancer if you recruited a smoker, took away their cigarettes, and shot them up to Mars.
The second is to develop a magnetic field around the ship similar to the one Earth has, to bend radiation around the module.
I can see one being used for the orbital insertion of a Jupiter mission. A manned trip to Ganymede or Callisto isn’t the difficult part, it’s the fact that Jupiter’ll kill you dead if you get too close. Europa’s off-limits to humans for probably the rest of this century.
Until they solve this problem, all talk of Mars is just talk.
A 2 year, 4 month trip nets you a single Sievert extra. That’s a 5% increase in cancer risk. IT’S. MARS. People will take that risk. Never mind that the base can be shielded with soil to reduce exposure during the longest part of the trip.
speaking of returns. I really don't know why I keep long on Apple. I have 300 shares bought on a basis of 68. Now I admit that is a fine profit on paper. But I have been trading : ONNN, PFE, AEO, BRCD, BBRY and have made about $5000 in a few short weeks . I just can't seem to get up the nerve to sell my apple stock. I'm tying up buying power. In one week BRCD went from 8.5 to 9.5. and I made over $1000. To make 1000 on apple it has to move from 100 to 104. now admittedly it has rolled up and down about that in a month but never in a week. I have AAPL allocated to my conservative account. But it sure is tempting to use that capital for more volatile securities. If it goes over 115 on the rally up to product announcement it will be difficult not to sell and take profits!
While I agree that there is 'no natural PE' and that 'appropriate' PEs can vary by industry, it is far from an ad hoc formula. Indeed, it has a rather precise meaning, couched in two specific fundamentals: the return expected from the stock (which is based on its risk), and the expected long-run growth rate in earnings.
Let me explain with some simple algebra. (I will make some simplifying assumptions without any loss of generality). Assume that the Earnings (E) of a company equal its cash flows. Call the forecasted earnings for Year as1 E1, for Year 2 as E2, etc., and call the expected return on the stock 'R'.
The Price of the stock (i.e., the earnings capitalized) today is then just: P = [E1÷(1+R)] + [E2÷(1+R)2] + [E3÷(1+R)3] + ........ ?
[SIZE=14px]Now, assume that investors can forecast (ex-post rightly or wrongly) E1. While we can certainly agree that there is no reasonable way to forecast E2, E3, etc., assume that investors (or analysts) can come up with an estimate of the long-run annual expected growth rate in earnings. Let's call it G. The formula above (applying some basic algebra) then becomes:[/SIZE]
[SIZE=14px]P = [E<sub style="line-height:1.4em;">1</sub>
÷(1+R)] + [E1×(1+g)?÷(1+R)2] + [E<sub style="line-height:1.4em;">1</sub>
<span style="line-height:1.4em;">×</span>
(1+g)2÷(1+R)3] + ........ ? = E<sub style="line-height:1.4em;">1</sub>
/[R – G][/SIZE]
[SIZE=14px]Bringing E1 to the left side,[/SIZE]
[SIZE=14px]P/E1 = 1/[R – G][/SIZE]
(Of course, the P/E1 is what we call the forward price-earnings ratio.)
Thus, when we use the term 'PE ratio', we are implicitly making a statement about a stock's perceived risk (the higher the risk for a given level of earnings, the lower the PE), and its earnings growth rate (the higher that number for a given level of earnings, the higher the PE -- from whence comes the notion that 'high-growth stocks have higher PEs').
Thus, when we're using a PE ratio as an indicator to buy a share we are implicitly making an assumption about its risks and growth. If we're buying it at the current PE, we're essentially saying that we're making a bet that its risk is lower than what the market currently thinks it is, and/or its earnings growth will be higher than what the market thinks it currently is.
(PS: I am not making any of this up; it can be found in most finance textbooks).
I understand the underlying financial reasoning. But as someone who has has several years of calc, and two years of statistics, I also understand that formulas such as this have little meaning. Someone decided that they were going to come up with a formula to describe a given vehicle, and we see the results. It doesn't mean that the math describes anything real. Someone has to decide what the terms mean, and why they have meaning. Afterwards, everyone just assumes the math is correct.
In other words, when an industry has an average P/E of 10, by fudging around with the numbers input into the formula, we can come up with a reason it should be 10, rather than 15. Still doesn't mean anything other than it is 10 because it is 10.
You have to be joking. It’s not the ‘40s. The Van Allen belts won’t kill us all. A trip to Mars is less dangerous than smoking for 20 years. You would reduce a person’s chance of getting cancer if you recruited a smoker, took away their cigarettes, and shot them up to Mars.
I can see one being used for the orbital insertion of a Jupiter mission. A manned trip to Ganymede or Callisto isn’t the difficult part, it’s the fact that Jupiter’ll kill you dead if you get too close. Europa’s off-limits to humans for probably the rest of this century.
A 2 year, 4 month trip nets you a single Sievert extra. That’s a 5% increase in cancer risk. <span style="line-height:1.4em;">IT’S. MARS. People will take that risk. Never mind that the base can be shielded with soil to reduce exposure during the longest part of the trip.</span>
I did say interplanetary radiation. Nothing to do with Van Allen.
speaking of returns. I really don't know why I keep long on Apple. I have 300 shares bought on a basis of 68. Now I admit that is a fine profit on paper. But I have been trading : ONNN, PFE, AEO, BRCD, BBRY and have made about $5000 in a few short weeks . I just can't seem to get up the nerve to sell my apple stock. I'm tying up buying power. In one week BRCD went from 8.5 to 9.5. and I made over $1000. To make 1000 on apple it has to move from 100 to 104. now admittedly it has rolled up and down about that in a month but never in a week. I have AAPL allocated to my conservative account. But it sure is tempting to use that capital for more volatile securities. If it goes over 115 on the rally up to product announcement it will be difficult not to sell and take profits!
You're a trader, not an investor. Investors such as myself look at the long term. I bought my last large position in Apple middle of 2004, when Apple was $16.97 a share before the split in 2005. If I were trading the stock instead of investing, it would have so,d it a number of times, and never made what I have. But I've kept , and bought so e more during the recession. I didn't sell it when it went done below $400.
I'd be willing to say that by not selling, I've made a bigger percentage than you have during the same time. I've got other investments, and while doing well, have not equaled this one. I used to do a lot of trading during the '90's, but not any more, just a bit.
Comments
While I hope SpaceX goes public at some point, I don't think it would be good at this point. Too many cooks...
What SpaceX really needs is a strong lobbying group to counter the growing anti-SapceX lobbying in government by ULA and it's cronies!
SpaceX is going up against some very powerful people that control many hundreds of billions of dollars. They are already trying to sick the government oversight police on them for launch delays.
Indeed. I think they need to be further along in their design and construction stages of both the manned Dragon and the Mars Colonial Transporter before they go public. They need to have a manned Dragon built and successfully launched once and the designs and specs for the MCT finished. Then they should hit up the stock market for funding to do the latter.
I'm not saying that the entire market is irrational, but it isn't exactly logical either.
All financial formulary for valuations are ad hoc. It's decided that one thing or the other means something, and is given a value. But all of that is just assumed to mean what it means. There is no "natural" P/E, for example. It's just decided that a particular P/E is appropriate for an industry. I and whatever the actual P/E is is assumed to be "right". But that's nonsense. It's all just feelings that something is right.
Now, that is nonsense! The reason why Amazon is priced where it is is simple. Bezos has convinced Wall Street that someday soon, Amazon will be making big profits. That's pretty much all it is. Once it's understood that it's impossible, going by their business model, the heyday of Amazon's stock price will be over.
If it moves P/E to 30, then the stock will plummet. At about a P/E of 830 now, and a stock price of about $330, that will leave investors hanging off a cliff. If the stock remained where it is now, while those sales and profits ballooned, then it might work, as the P/E slowly dropped. But the stock could continue going up during this time, whereupon, it would crash.
Going by any normal standard, Amazon should be no more that 30 now. It's a retailer, mostly, with unprofitable hardware lines, and generally, no profit. So the stock could be fairly priced at $15.
We can forget the Mars transporter. There is no evidence that people can survive a trip to Mars. The interplanetary radiation is so intense that no normal ship could carry people in safety.
Two of the ideas being thought about are either too difficult, too expensive, too dangerous in their own right, or all three.
One idea is to encase the life module in 10,000 tons of ice to absorb the radiation. The second is to develop a magnetic field around the ship similar to the one Earth has, to bend radiation around the module.
The first would require a power source for the engine too big to be practical. Also, getting that much ice around the ship would be extremely difficult.
The second is also very expensive, and secondary radiation from the generation of the field itself could kill the passengers.
Until they solve this problem, all talk of Mars is just talk.
I'm not saying that the entire market is irrational, but it isn't exactly logical either.
All financial formulary for valuations are ad hoc. It's decided that one thing or the other means something, and is given a value. But all of that is just assumed to mean what it means. There is no "natural" P/E, for example. It's just decided that a particular P/E is appropriate for an industry. I and whatever the actual P/E is is assumed to be "right". But that's nonsense. It's all just feelings that something is right.
While I agree that there is 'no natural PE' and that 'appropriate' PEs can vary by industry, it is far from an ad hoc formula. Indeed, it has a rather precise meaning, couched in two specific fundamentals: the return expected from the stock (which is based on its risk), and the expected long-run growth rate in earnings.
Let me explain with some simple algebra. (I will make some simplifying assumptions without any loss of generality). Assume that the Earnings (E) of a company equal its cash flows. Call the forecasted earnings for Year as1 E1, for Year 2 as E2, etc., and call the expected return on the stock 'R'.
The Price of the stock (i.e., the earnings capitalized) today is then just:
P = [E1÷(1+R)] + [E2÷(1+R)2] + [E3÷(1+R)3] + ........ ?
Now, assume that investors can forecast (ex-post rightly or wrongly) E1. While we can certainly agree that there is no reasonable way to forecast E2, E3, etc., assume that investors (or analysts) can come up with an estimate of the long-run annual expected growth rate in earnings. Let's call it G. The formula above (applying some basic algebra) then becomes:
P = [E1÷(1+R)] + [E1×(1+g)?÷(1+R)2] + [E1×(1+g)2÷(1+R)3] + ........ ? = E1/[R – G]
Bringing E1 to the left side,
P/E1 = 1/[R – G]
(Of course, the P/E1 is what we call the forward price-earnings ratio.)
Thus, when we use the term 'PE ratio', we are implicitly making a statement about a stock's perceived risk (the higher the risk for a given level of earnings, the lower the PE), and its earnings growth rate (the higher that number for a given level of earnings, the higher the PE -- from whence comes the notion that 'high-growth stocks have higher PEs').
Thus, when we're using a PE ratio as an indicator to buy a share we are implicitly making an assumption about its risks and growth. If we're buying it at the current PE, we're essentially saying that we're making a bet that its risk is lower than what the market currently thinks it is, and/or its earnings growth will be higher than what the market thinks it currently is.
(PS: I am not making any of this up; it can be found in most finance textbooks).
You have to be joking. It’s not the ‘40s. The Van Allen belts won’t kill us all. A trip to Mars is less dangerous than smoking for 20 years. You would reduce a person’s chance of getting cancer if you recruited a smoker, took away their cigarettes, and shot them up to Mars.
I can see one being used for the orbital insertion of a Jupiter mission. A manned trip to Ganymede or Callisto isn’t the difficult part, it’s the fact that Jupiter’ll kill you dead if you get too close. Europa’s off-limits to humans for probably the rest of this century.
A 2 year, 4 month trip nets you a single Sievert extra. That’s a 5% increase in cancer risk. IT’S. MARS. People will take that risk. Never mind that the base can be shielded with soil to reduce exposure during the longest part of the trip.
amazing: how did we get from Apple's share price to Mars and Jupiter?
speaking of returns. I really don't know why I keep long on Apple. I have 300 shares bought on a basis of 68. Now I admit that is a fine profit on paper. But I have been trading : ONNN, PFE, AEO, BRCD, BBRY and have made about $5000 in a few short weeks . I just can't seem to get up the nerve to sell my apple stock. I'm tying up buying power. In one week BRCD went from 8.5 to 9.5. and I made over $1000. To make 1000 on apple it has to move from 100 to 104. now admittedly it has rolled up and down about that in a month but never in a week. I have AAPL allocated to my conservative account. But it sure is tempting to use that capital for more volatile securities. If it goes over 115 on the rally up to product announcement it will be difficult not to sell and take profits!
Because AAPL is going to 'infinity and beyond'?
I understand the underlying financial reasoning. But as someone who has has several years of calc, and two years of statistics, I also understand that formulas such as this have little meaning. Someone decided that they were going to come up with a formula to describe a given vehicle, and we see the results. It doesn't mean that the math describes anything real. Someone has to decide what the terms mean, and why they have meaning. Afterwards, everyone just assumes the math is correct.
In other words, when an industry has an average P/E of 10, by fudging around with the numbers input into the formula, we can come up with a reason it should be 10, rather than 15. Still doesn't mean anything other than it is 10 because it is 10.
I did say interplanetary radiation. Nothing to do with Van Allen.
You're a trader, not an investor. Investors such as myself look at the long term. I bought my last large position in Apple middle of 2004, when Apple was $16.97 a share before the split in 2005. If I were trading the stock instead of investing, it would have so,d it a number of times, and never made what I have. But I've kept , and bought so e more during the recession. I didn't sell it when it went done below $400.
I'd be willing to say that by not selling, I've made a bigger percentage than you have during the same time. I've got other investments, and while doing well, have not equaled this one. I used to do a lot of trading during the '90's, but not any more, just a bit.