Just a bit of a follow up on the notion of this smoothed value line being predictive of where the stock price might go next---

Since the line has so darned few squiggles, you can extrapolate it a tiny bit. As a result, you get an extremely good idea of where the line would be today, even though this quarter's figures aren't built into the calculation yet. Nor even last quarter's, at the moment.

Since we know the level of the line at each date in the past, and we know the level of the price at each date in the past, we know the average ratio between the two. Looking at the average ratio since 2005 and applying it to today's level of that line, the price today "should be" $370.22 per B share in today's dollars. Thus, today's price of $441.26 is about 19% above what you would expect at the usual multiple since then. If the future value trends and future valuation multiples are not very much different from those typical of the past, we have already received the benefit of price rises we might reasonably have expected over the next couple of years. Stated in a much simpler way, the price has gone up more than the value has lately.

We can also look at the past to see what usually happened next. Historically this distance above the "norm" was followed on average by meaningfully negative real returns in the next year (-13% ish), and slightly negative in the next two years (-3%/year ish). Though of course the future may be different: this "what happened before" view has the flaw of potentially overweighting the observation that following the few periods of similarly high valuation multiples the stock just happened to go on to become undervalued, not merely averagely-valued, a year or so later. It would make more sense to expect an average valuation multiple as your base line assumption, not a bad one.

These are not predictions per se, just following a line of reasoning. IF certain trends and relationships are similar, THEN that's what the implication is for the stock price.

Jim