On the Xoma front, was cleaning out the bookshelves and re-read a Foreign Affairs Jan/Feb 96 article The Return of Infectious Disease by Laurie Garrett (14 pages).
1918-19 swine flu circumnavigated the planet five times in 18 months, killing 22,000,000 people.
When the article was written, seven countries had population densities exceeding 2,000 people/sq. mi.; 43 with densities exceeding 500. US average is/was 74.
Pneumonic plague struck Surat, India in '94. Within 48 hours more than 500,000 residents boarded trains and dispersed to every corner of the Indian subcontinent. Fortunately the strain of Y. pesits was a weak one.
Article talks about budget cuts, biological warfare, AIDS, and a few other things. Next time you happen to be in a library, might be an interesting 5-7 minutes of reading.
General market comments.
Performance from Jan 1, '97 to Dec 31, '97 (excluding dividends)
+31.0% S&P 500
+22.6% Dow Jones Indus Avg. (DJIA)
+21.6% NASDAQ-OTC Composite
+20.5% Russell 2000
New money estimated at around $40+ billion from 401(k)s and IRA year-end contributions for 1997.
Friday: Dec '97 Employment Report and Nov '97 Wholesale Trade Report.
Around January 10 companies start to report both their 4th qtr EPS and their 1997 EPS.
Anticipate that only stocks with Asian exposure will be slammed with selling pressure when they report declining sales and lower fourth quarter 1997 EPS.
Let's assume that due to the Asian and So. Korean problems the '98 est EPS of $477.88 comes in down about 10% to $430 and that the DJIA trades in 1998 at a 15.2E PE, which is the lowest PE that the DJIA traded at in '97. 15.2E times $430 equals 6536.
The negative impact of the Asian and So. Korean economic problems are just starting to show in the DJIA's declining, consensus, estimated EPS. In mid-January '98, if a large number of companies start reporting lower 4th quarter'97 EPS due to the slowdowns in Southeast Asia and South Korea the '98 estimated EPS should start to be reduced by the analysts.
In 1997 the DJIA traded at a high of 19.7 P/E and a low of 15.2 P/E.
The DJIA is currently trading at 19.0E P/E times 1997 estimated EPS of $418.17 and is trading at 16.6E P/E times 1998 estimate EPS of $477.88E. Projected 1998 DJIA price levels based on various P/E what-ifs:
14E P/E times $477.88 = 6690
15E P/E times $477.88 = 7168
16E P/E times $477.88 = 7646
17E P/E times $477.88 = 8123
18E P/E times $477.88 = 8601
19E P/E times $477.88 = 9079
20E P/E times $477.88 = 9557
21E P/E times $477.88 = 10035
Expect these numbers to be revised downward in late Jan. |
