> And that valuation, depends on the global investment's community risk aversion and risk preference.
>
> Facebook trades at a P/E ratio of 71, meaning the equity is worth 71 years of current earnings. Netflix has a P/E of 116. Think that's shorts-sighted?
Most humans aren't trading on earnings, but on market psychology, believing they can sell to a greater fool in the future. And most trades aren't even made by humans, but by HFT algorithms trying to win massively-leveraged short-term bets for a fraction of a percent. The Facebook and Netflix P/E ratios have very little to do with long-term earnings.
Most humans aren't trading on earnings, but on market psychology, believing they can sell to a greater fool in the future. And most trades aren't even made by humans, but by HFT algorithms trying to win massively-leveraged short-term bets for a fraction of a percent. The Facebook and Netflix P/E ratios have very little to do with long-term earnings.