> Stockholders have massively rewarded AMZN for inventing and investing heavily in cloud computing.
Yes, but AMZN is pretty unique in that regard. I don't know why, but AMZN shareholders have put up with things that I don't see any other shareholders putting up with. And it's gone well for them, so I'm definitely not saying it's a bad decision for their shareholders, just that... it's not the norm.
So I don't think the P/E ratio is good evidence that stockholders value long-term planning, since the best example of a company whose stockholders do value long-term planning has a P/E ratio is 7x higher—and has been above 50x higher—than the S&P 500 average.
> A high P/E is the quintessential play for the long term future rather than next quarter's profits.
I agree there. But the question then is, what is a high P/E? We can look at Amazon, who is known for playing for the long term future, and we see their P/E ratio is currently ~180, but usually in the 500-1000 range. So that'll give us a good idea what "high P/E" looks like.
And then if we compare it to the S&P 500 average, which is about 25, but usually in the 15-20 range, is that high enough to qualify as evidence that their shareholders are playing for the long term future? And I'd say, no: it's evidence that they are not. If 200, 500, 1,000 are "high P/E", then 15, 20, 25 are low.
Looking at specific companies, you would get a different picture, but it seems like, as a whole, stockholders of the S&P 500 at least are not investing in the long-term future.
I would think that a company that grew large enough to be in the S&P 500 would not sacrifice it all for the next quarterly results. Hence, I'd expect a larger P/E for the S&P 500 than for the market as a whole.
Then I'm having trouble understanding what you mean when you say:
> > The stock market's quarterly focus
> This idea constantly resurfaces. It's easily shown to be incorrect. If it was true,
> 1. companies would have low P/E ratios
But it looks like companies do have low P/E ratios—the S&P 500's P/E ratios are considerably lower than Amazon (which is company where the stack market does have a longer term outlook), and (as you say), the market as a whole you'd expect to be lower than that even. So when you say:
> Lots of companies have high P/E ratios, meaning the investors believe in the future of the company rather than next quarter.
What companies do you mean by that? Among big companies (that can afford significant long-term R&D spending, which is what began our thread of this conversation) what do you think counts as a high P/E ratio?
You want to believe that companies are slaves to short term results, that they eat their seed corn to do so, be my guest. I'll continue to invest using a buy and hold for decades strategy, which has served me very well.
Me, I'd be buying lots of shares in SpaceX if it were publicly traded. I had to settle for buying TSLA shares (up about 50% from where I bought it).