Qualcomm Incorporated (QCOM) Message Board

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Technology Stocks : Qualcomm Incorporated (QCOM)

QCOM 155.05

+0.6%

12:13 PM EST

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To: marginmike who wrote (106936)	10/12/2001 8:51:54 PM
From: Jordan Levitt	of 152472

Hi Mike, A few important points about the S&P multiple. First of all if look at the S&P multiple ex-technology it is at about 17. That is not as low as other bear markets when it has gotten to as low as eight times earnings as you have mentioned before. Usually though when the bear has taken hold in the past we have had much higher interest rates (in order to choke out inflation). A lower discount rate allows for higher valuations. Most importantly, looking at aggregate numbers like that can be very misleading. Due to the easy access to equity markets of the past several years, many companies have gone public who don't have any earnings. That skews the earnings multiples upward. In calculating the earnings multiple of an index they add up the total earnings less the total losses of the companies in the index and then compute the P/E multiple. If you take out the companies who are losing money in the S&P 500 (after all, you don't have to buy those companies) and look at the average P/E for the companies that actually have earnings it is around 14. Not nearly as high as the aggregate P/E would suggest. Years ago, pre-bubble, companies needed a history, and an earnings record in order to come to market. So the comparisons that are made between the index now and the index in the seventies bear or the eighties bear are somewhat misleading as the the index itself has changed dramatically. Makes you think about all those sheep who bought index funds and ETF's. As usual Joe Six Pack gets screwed again. You may well have a market of stocks (rather than a stock market) where many individual stocks rise significantly yet the averages go nowhere for years. BTW, this is only for the S&P and the Nasdaq, the DOW is its very own basket case. High P/E's, low growth, bad combo. Have a great weekend Mike. Time to go drink a nice cold Canadian beer ! Cheers !

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