RAINFOREST CAFE Message Board

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Non-Tech : RAINFOREST CAFE

RAIN 5.400

+1.8%

Nov 28 9:30 AM EST

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To: megazoo who wrote (3641)	12/21/1997 12:28:00 PM
From: Dennis Vail	Read Replies (3) of 4704

Hi SXB, Welcome to the thread !! You pose some very thoughtful questions. While I don't claim to have any answers that's never stopped me from expressing my opinions before so........... 1) During a severe bear market in general small and mid caps will suffer more than largecaps. Growth companies will suffer more than 'value' companies. RAIN's a mid-cap growth issue......... 2) After the bear market runs its course mid-cap growth companies will resume trading at a significantly higher multiple to earnings than 'value' (low growth) companies based on their perceived rate of earnings growth of the ensuing 3-5 years and the historic consistancy and predictability of the earnings growth . So if RAIN's earnings growth stays on track during the bear market then those long-term holders who kept the faith throughout will end up seeing just as much appeciation as if there were no bear market. 3) What causes the bear market will deteremine how RAIN's earnings ( as well as all other companies earnings) are effected. If it's inflation driven by increasing wage pressure then I suspect RAIN will do just fine. Wages go up. Food prices go up. Menu prices go up. We continue to import our retail goods from China where prices are going down due to overproduction. Families stay as busy and as strapped for time as ever. Business at RAIN should remain very good as it will continue to be a great deal in terms of what you get (dining/entertainment for the time/money you pay. And time value is just as big of a facor as money value. At RAIN you entertain the kids, yourself and get a great meal all at the same time and without going out of the way of the movie and shopping you also want to do. hence RAIN has a high time value) Earning stay on track or may be ahead of track long-term 4) However the potentially nastier and more likely cause of a bear market would be deflation pressure leading to a major depression. Briefly stated the Asian countries will have to dump all the goods they've overproduced and are continuing to overproduce at increasingly lower prices as they compete with one another over the decreasing buying power of the area. They then do the same in importing goods to the world and particularly the US since we still have the healthy buying bucks. Off course first our exporting compnaies get their earnings pinched then domestic companies are forced to lower prices where there is competetion from the increasingly desperate Asian exporters. Finally with the unemployment so high US companies are continued to be pressured to raise workers wages and their profit margins are now getting squeezed from both ends while the government is increasingly caving in to corporatepressure to enact protectionist measures........This could be the scenario towards the end of 1998 and its similar in nature to what caused the Great Depression. Of course increasing political instabiklity in Asia w3ill not help matters. If that takes place then its time for all of us to take a defensive position. So if you're still in the stock market at that time stick your head between your legs........... 5) However if it doesn't reach catastrophic proportions but only lowers corporate profits say until the immigration laws are changed, etc. So maybe we have a hard last year and a half of the millenium until the world economy gets back in sync. In this case I think RAIN will emerge stronger and with a bigger market share than before. What will happen is that the weaker restaurant and eatertainment companies ( both financially and in terms of the quality and niche occupied) will go belly up leaving a lot fewer companies to service the same size market. I think RAIN has the balance sheet, the concept, the food, the locations, etc to be one of the last restaurants standing if it comes to that. I would like to see an experienced COO/President named and I expect that to happen by the time earnings are announced. I and I expect many others will be shocked and disappointed if one isn't named by then. Happy Solstice, Dernnis

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