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To: Lucretius who started this subject	6/8/2001 12:52:05 AM
From: ild	Read Replies (1) of 436258

messages.yahoo.com SOX - A Valuation Lesson by: Jabboy 06/08/01 12:43 am EDT Msg: 96495 of 96495 I just got done reading tonight's contrary investor. They devoted a good part of their work to the Sox and the insanity of current valuations. Here are some finer points. The Sox bottomed at 144 on the index in July 1996. Since that bottom the Sox is up 450%. At the same time only TWO of the 16 companies in the index have earnings which are presently up over 100% from 96. In fact 3 of the Sox components now have LOWER EARNINGS THAN they did in 96. Investors are getting this "great" performance now at a 450% premium. The companies with lower 2001 est. earnings as compared to 96 are....Intc, TER..and drumroll....you guessed it the bloated hot air called MU! Amazing, you can have MU's sub 96 earnings for just 5x the price. Sign me up! MU 01 estimate .52 96 eps 1.38 Ter 01 estimate .41 96 eps .56 Intc 01 estimate .55 96 eps .75 The rest of these companies had on average about 40% higher earnings. LLTC and Xlnx were the two with 202% and 118% higher earnings respectively. There's another problem though...the ESTIMATES are DROPPING so this picture is even worse than it looks. Current average PE for the group is 54. This was as of yesterday so you can add 7% to that to get a current pe of 58...for cyclical commodities. Now what is driving this? HOPE...hope for a return to peak earnings. A peak driven by and IPO and VC lead funding of a major dotcom and telecom buildout. A corporate sector intent on not missing the internet train. Enormous Y2K MIS spending. A consumer who was bulletproof and on a spending binge. 2000 was an ANOMOLY in both earnings prospects and in stock valuations. Still investors hope and dream it will happen again. They are putting their money to work and jumping on the train to sure profits with the fed at their backs. They look at old highs and visualize these stocks right back up to levels attained in a pure anomoly. At the same time the economy is weakening and evidence mounts that the consumer spending shoe is about to drop. There will be no V recovery. At best we may get the U. This all sets the stage for a major selloff at some point. The 300 area is support from a major trendline going back to 95. We may not get there but I will bet we get close before it's over.

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