MARKET INDEX TECHNICAL ANALYSIS - MITA Message Board

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Strategies & Market Trends : MARKET INDEX TECHNICAL ANALYSIS - MITA

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To: Lizzie Tudor who wrote (16094)	2/5/2003 2:48:46 PM
From: Steve Lee	of 19219

when you get earnings groth and no top line growth then the earnings growth comes from a reduction in costs. That means a reduction in the top line of suppliers and employees which means next quarter there is also no top line growth. So if there is no top line growth next quarter they can only increase earnings by cutting more costs in which case the quarter after that gets hit. If they dont, then they wont increase earnings but will suffer from everyone else's cost cutting and earnings will go down. You are looking in the rear view mirror by looking at the results CSCO just announced. If you are going to use PEs then you need to estimate earnings and growth over the next few years and see how the ratios line up for those expected results. Unfortunately making such predictions is difficult (altho interesting). There are more reliable and profitable ways to invest like looking at the Investors Intelligence bull/Bear ratio, or if u insist on using fundamentals, then the simple rule that all bubbles end in historical low P/S ratios should be enough for you to see the folly of your bullish ways!

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