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Technology Stocks : Citrix Systems (CTXS)
CTXS 103.900.0%Nov 2 5:00 PM EST
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To: jhg_in_kc who wrote (7321)12/3/1999 8:59:00 PM
From: Chuzzlewit  Read Replies (2) of 9068
 
I claim no prescience. I don't pour over charts looking for repeatable patterns. I am simply pointing out the obvious. The NASDAQ is up around 60% this year. Many stocks sport P/E's of over 100. And the big cap stocks like CSCO and INTC have astronomical valuations. This looks just like the "nifty-fifty" of years ago. If you plot the S&P500 trailing P/E against the yield of a long bond you find that there is a fairly linear relationship. Except for this year which produces an "oulier" that is so far off the line as to be ludicrous. That should tell you that investors are not paying any attention to the old rules of valuation.

There are only two things that should cause valuations to increase: decreasing interest rates and increasing forecasted growth. In fact, interest rates have edged up, and it looks as if the economy is cooling just a bit. So the only thing you might say about this environment if you were a dyed in the wool bull is that a slowing economy will ease interest rate fears.

I think that there are a lot of people who are mindlessly buying stocks, and these people will be badly hurt, because I think that many tech stocks and dot coms are trading at 10 times or more any reasonable valuations. And I can easily see some of the big cap names falling by 70%.

Step very carefully my friend. This market is a minefield.

TTFN,
CTC
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