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Technology Stocks : Dell Technologies Inc.

DELL 116.89

-0.5%

10:38 AM EST

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To: Meathead who wrote (22920)	11/25/1997 9:20:00 AM
From: Franco Battista	Read Replies (2) of 176387

Meathead, be careful. The bubble in stocks like Dell and the stock market in general is\was created by the abundance of 'foolish money' that became available when interest rates fell. This massive influx of liguidity into the markets has driven prices up to amazing levels. A stock like Dell in a true bear market would be trading at no more than 10 times past earnings. Perception can drive prices to ridiculous high levels (like now) or to ridiculous low levels, so low that you cannot even imagine. Ford at one point traded at 3 times earnings! This is how Peter Lynch made a killing for the Fidelity Magellan Fund and turned it into the biggest fund around. He bought all the Ford shares he could get a hold of. Ford was trading cheap because everyone thought that the competition from the Japanese automakers would drive US automakers bankrupt! Silly isn't it? This was about three decades ago, when the auto industry was far more important to the economy than computers are now. I never underestimate how high momentum will carry a stock, don't make the mistake of underestimating how low pessimism can drive it.

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