[btilly]

There hasn't?

The theory under which Apple justifies an insane valuation is the one where they continue a constant stream of innovation, defining new products, keeping everyone else guessing.

The simple fact that in the last year Apple has not delivered evidence that they can continue to do that should justifiably weaken belief in that theory. Which means that our best estimate of its future returns is far worse than this optimistic scenario. Which means that we should give less weight to that possibility, and therefore our best estimate of Apple's correct price is less than it was.

Because of this where you see evidence that the market is not pricing efficiently, I see evidence that you are not as smart as the market about finding what price signals to pay attention to.

[clarky07]

>The theory under which Apple justifies an insane valuation...

Let's stop there. They have a PE of 7 ex cash. At the top, they had a PE of about 15. Amazon has an insane valuation. Apple does not, and they didn't at the peak. It was merely higher than it is now.

[btilly]

Let's not stop there.

Apple now has declining marketshare in existing business lines, and there is some evidence that they don't know how to generate new profitable product lines. A year ago neither was true, but there were worries about what the lack of Steve Jobs would mean. So their valuation a year ago was high. Their valuation now fits with a company that the market expects to decline.

Amazon by contrast has strong marketshare, increasing numbers of lines of profitable business, and the market understands that they are not generating profit because they keep starting up new potential lines of business that lose money in the short run. They could become very profitable tomorrow if they wanted.

I am not saying that the market's theory about either company is correct. Just that these are theories that are widely held, which justify the stock prices that you claim are simply wrong.