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Strategies & Market Trends : MDA - Market Direction Analysis

SPY 662.63

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Nov 19 4:00 PM EST

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To: Psycho-Social who wrote (74762)	4/12/2001 10:24:10 AM
From: brunn	Read Replies (1) of 99985

P/E of Nasdaq undoubtedly has been inflated by the wave of dotcoms that never should have gone public--although this problem should be quickly correcting itself as the P's go to 0 and the businesses are no longer listed. As long as they exist, however, their losses will contribute pressure on the P/E even if their stock is close to 0. (Even if a company's market value is just 1 million, if it loses 1 billion that 1 billion will be removed from the profits of the real businesses in the index.) P/E of the Nasdaq 100 would seem more reliable of a valuation of the technology sector--it is more of pure play on real technology companies that are less likely to go out of business. The problem with the Nasdaq 100 as I see it is its tendency to add the highest flyers to its list which probably added to its volatility on the way up and down. The way I look at it: The problem with the Nasdaq's valuation is that includes the likes of Etoys. If you include the losses of these type of companies the P/E becomes meaningless. The problem with the QQQ is that it bought into AMCC/JNPR's on the way up and is paying for it on the way down.

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