1) The document discusses Bill Gates' enormous wealth and expensive home, noting that he made his fortune in the 25 years since founding Microsoft in 1975. 2) It then explains stock valuation using the price-to-earnings ratio (P/E ratio), giving Maytag and Whirlpool as an example where Maytag has a higher P/E but is growing earnings faster. 3) The conclusion is that while Maytag has a higher P/E, it is the better investment because its faster earnings growth rate justifies its higher valuation. The P/E ratio should be considered relative to a company's growth prospects and peers.

1. How Stocks Work

2. Apple since 2003

3. Microsoft: Up 25,000% since IPO in 1986

4. Microsoft loses 11% on 4/28/06

5. Bill Gates loses over 3 Billion dollars… in one day 4/28/06

6. NOW HE IS ONLY WORTH 55 BILLION DOLLARS.

7. Bill Gates $113 Million House Most expensive residential house ever built. The $1.4 million guest wing has two bedrooms, 2 bathrooms, & its own dinning room. http://www.usnews.com/usnews/tech/billgate/room12a.htm

8. Pool: $6 million, 60-foot long, complete with a waterfall and its own underwater stereo system. 12 bathrooms . 3 kitchens . Library has 10,000 rare books including da Vinci’s 72 page $31 million scientific notebook.

9. Bill’s garage has 3 Porshes, 1 Mercedes, 1 Jaguar, 1 Ford Mustang, and a Ferrari. His other $1.2 million garage will hold 30 cars. Bill can jump off excess energy in his trampoline room with 20-foot high ceilings.

10. Consider that he made this money in the 25 years or so since Microsoft was founded in 1975. If you presume that he has worked 14 hours a day on every business day of the year since then, that means he's been making money at a staggering million dollars per hour, around $300 per second. Which means that if, on his way into the office, should he see or drop a $1000 bill on the ground, it's just not worth his time to bend over and pick it up. He would make more just heading off to work . Bill Gates’ Opportunity Cost of stopping and picking up money on the street

11. Lucent Technologies: Ouch!

12. GENERAL MOTORS: OUCH!

13. Which car is more expensive? $5,000 $8,000

15. Or Maytag at $27

18. Another way to look at the PE formula M (Multiple) X E (Earnings) = P (Price) M X E = P

19. WHIRLPOOL’S PE RATIO $67 -------------- = 11 PE RATIO 6 WHIRLPOOL  PE = 11 MAYTAG  PE = 12

21. Maytag is growing its earnings at 9% a year and Whirlpool is growing at 5% Most investors would argue since Maytag is growing twice as fast, it’s PE Ratio should be twice as high Whirlpool’s. So Which stock is really Cheaper? MAYTAG, even with its higher P/E Ratio, because it is growing twice as fast!!