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Technology Stocks : Dell Technologies Inc.
DELL 133.78-0.1%Nov 14 9:30 AM EST
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To: McNabb Brothers who wrote (25098)12/14/1997 8:06:00 PM
From: Chuzzlewit  Read Replies (1) of 176387
 
Hank, while it is true that real bond yields are quite high (nominal yield less inflation), you need to compare nominal yields to P/E, in which case the prediction of rapidly falling P/E makes very little sense unless we begin to see a major contraction of earnings (which appears doubtful at this time). I think that the companies that will be pressured most will be the suppliers of high-tech capital equipment like AMAT, and some vendors whose products are either sold to Asian customers or who compete with others who have significant Asian exposure. In other words, if a product had a significant Asian customer base, all vendors will be hurt to some extent even if some of the vendors had no Asian exposure because the overall demand will be reduced and there will be heightened competition in the other healthy markets.

I agree that we will continue to see long-term interest rates dropping as a result of the flight of wealth from Asia into the U.S. markets.

I see very little evidence (none acutally) of wage inflation because productivity gains continue to either keep pace with or outstrip wage increases. The biggest problem that I see are continued relatively high interest rates which will further strengthen the dollar vs. other currencies which might lead to the kind of dumping you as a short would probably be betting on. If I were Greenspan I'd be giving very serious thought right now to lowering interest rates or we could start seeing that disinflation that some people are worried about.

Well, I think that's enough economic musings for a Sunday night.

Regards,

Paul
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