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Strategies & Market Trends : Waiting for the big Kahuna
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To: Tom Trader who wrote (3450)7/31/1997 2:31:00 PM
From: Arik T.G.   of 94695
 
TT, the reason 30 years bonds yeild is over 6% is that it's in equilibrium with stocks PE.
Nobody but momentum players buys Dell with PE over 30 or MSFT over 40 unless they think todays PE of 40 is next year's 30 and '99 earnings times 23.
The fashion is growth, as if past performances guaranty infinite future growth.
If you think Dell will grow in a future rate of 30% then a current PE of 35 transforms into 12.
Another reason- Alan G. will not hold his position for 30 years, nor a republican majority in the house.
If yeild drops below 6%, I suggest everybody should run to the mountains. Have you read Lucifer's Hammer? There's a chapter describing the biggest tsunami ever.

Arik.
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