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Strategies & Market Trends : Gorilla and King Portfolio Candidates -- Ignore unavailable to you. Want to Upgrade?

To: Ausdauer who wrote (2598)	6/11/1999 10:20:00 PM
From: LindyBill	Read Replies (1) \| Respond to of 54805

Aus, company basics work long term, 3 to 5 years, market conditions work short term, 1 day to 1 year, for instance. Look what happened last year with an interest rate rise. The Gorillas took a beating, because the funds could sell them easily to raise money to pay off people who wanted out, and they also sold them because they knew everyone else would, a circular situation. I rode Cisco from 65 to 45, and it was not fun, I will tell you! But, I stayed in, because I knew it would come back up, and because I cannot time the market. We certainly don't need an interest rate increase this year, IMO, but, the Fed is a bunch of nervous bankers, so God knows what they will do.

To: Ausdauer who wrote (2598)	6/12/1999 12:05:00 AM
From: Mike Buckley	Read Replies (1) \| Respond to of 54805

Aus, "The impact of changing interest rates affects only the vertical axis (returns) and not the horizontal one (Competitive Advantage Period). So changes in interest rates affect all stocks the same." From page 95 in the manual. Though Moore and his co-authors didn't make any attempt to distinguish between companies with various amounts of debt or cash position, they do discuss the impact of better execution on page 97. They show that better execution has only a modest affect on the stock price because better execution only affects the rate of return during the CAP. It doesn't alter the CAP itself. To the extent that the balance sheet is a function of execution, there are some inferences we can draw about increased debt. If the debt is used successfully to leverage all of the company's resources, better overall exeuction will be the result. (That's the main reason so many rapidly growing high-tech companies use convertible debt.) On the other hand, if the debt is a symptom of many miscalculated steps by management, we're looking at relatively poorer execution. In summary, the impact of interest rates on a company's performance is a lot more complex than merely measuring the change in the company's cost of debt or the company's increased earnings from short-term investments. --Mike Buckley P. S. Probably more than 200 words. Didn't take the time to count. :)