I think they got disconnected in about 1994 or so. After all, only when you have expectations of 20 or 30% growth in already multi-billion dollar companies can you get so caught up over missing estimates by a penny or two. If you are a 5% growth story and you miss by a penny, your long term price should change maybe 50 cents. Not these 10% sell-offs that have become all too common.


IMO, capitulation is close at hand. From a fundamental sense, stocks are getting cheap...especially the big names. They are the ones that can fund at these ultra-low interest rates. I mean 10 years ago if you told any big company they could issue long-term bonds and only pay about 6.5-7% on them they would have asked where do they sign up. After all, think of what that implies. Because of taxes, that means any of these companies could go out and borrow money and pay essentially 4% on it, after tax. If you are a big company with quality products and a good distribution network, how can you go wrong? There aren't many investments a quality company can find that won't give them at least 4% return. Above 4% and they have added shareholder value. This number is so low that often companies could take on mediocre business and just get that type of return from cost of scale improvements. This is unprecendented since the 50s and people are so caught up in the busted bubble that they are looking past this. Sure you might have gotten buried buying up a dot.com or even a survivor like Yahoo when it was over 200, but if you buy up a AAA credit rated company that has access to easy capital, you have to see that times were rarely easier to build market share cheaply and position themselves for the return to a positive economy. Fundamentally the investment world is ignoring things, they are caught looking the other direction. People will eventually get over Enronitis and the phantom double-dip recession and after a last bought of capitulation where the current trend of running out of the market into a house your really don't need for speculative purposes plays its course, the market will once again find its way. NASDAQ 4000 is likely many years off, but it will get there again someday.