The willingness to invest in the stock of companies having high P/E’s, or as otherwise reflected, the cumulative amount of the number of years of the company’s latest 12 months of EPS, displays a lofty level of optimism.

Among the positive beliefs must be that:

Inflation which is adversely impacting companies dependent upon the American economy will subside.

International conflicts, such as currently occurring in the Ukraine, will be settled, and no longer be the cause of hunger and economic devastation in countries dependent on commercial access to the Ukraine.

The Ukraine war can be contained to the present location and not expand into NATO country areas.

China’s perceived political desire to annex Taiwan will remain controlled and physical combat can be delayed, if not avoided.

Climate warming and other international environmental issues can be positively addressed and will not create international economic chaos.

International hunger and health issues can be managed and financed without severe adverse impact on the American economy.

The economic, and therefore political, strife between China and America can be moderated so that both countries can prosper.

The elementary and secondary education failings of America versus that of China can be corrected so that America can continue to be competitive to China.

The political situation in America, with a gridlocked Congress and extremist elements in both parties impacting the traditional system, can be managed in order to permit the introduction and passage of necessary legislation.

The democratic process can be maintained in an increasingly economically challenged American republic, relying on a dated Constitution, and faced with growing politicization of those of different economic status.

There are other issues of concern for some investors, but clearly they are not influencing most investors, as it must be assumed they believe that American publicly traded companies will be able to significantly increase their profitability in the future.

Of course, I hope the optimists are correct and the possible problems noted above will be satisfactorily resolved.

Also, of course, whatever happens, it is more likely that company revenues will increase, rather than company EPS, and therefore, whenever possible, it is in the investor’s best interest to own a well-structured revenue royalty than equity.

 

Arthur Lipper, Chairman                          arthurlipper@gmail.com
British Far East Holdings Ltd.