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To: IQBAL LATIF who wrote (29691)	11/12/1999 8:54:00 AM
From: JD	Read Replies (1) \| Respond to of 50167

WASHINGTON, Nov 12 (Reuters) - The productivity of U.S. workers rose sharply in the third quarter of this year while the growth in unit labor costs slowed significantly, the Labor Department said on Friday in a report suggesting benign inflationary pressures. Productivity, measuring the output per hour of workers outside the farm sector, rose at an annual rate of 4.2 percent in the July-September quarter, the department said. That was the fastest productivity rate since a 4.4 percent gain in the first quarter of last year and followed weak growth of just 0.6 percent in the second quarter. Jerry

To: IQBAL LATIF who wrote (29691)	11/12/1999 2:36:00 PM
From: jim kelley	Read Replies (1) \| Respond to of 50167

Iqbal, I will not argue that stocks run up over their "fair market" value as computed by NPV, PEG or one of the other methods. This is obviously true, e.g., the internet stocks and the software companies that produce e-commerce software. However, these distortions in market value tend to be corrected over time. Apparently, the market is not efficient as was once thought! It would be interesting to tabulate the NPV and PEG valuations of some of the large cap stocks based on the current and forward projections and see how well that correlates with their valuation ranges. As for SUNW, it is riding momentum into a split and I suspect that it will drop abruptly after the split. SUNW's long range future pivots on whether INTC can launch its IA-64 product in a credible way. A successful launch by INTC will reduce SUNW's pricing power and eventually cut its profits to the quick. SUNW has very high SG&A and R&D costs as well as very high acquisition costs. What is sustaining it are the margins on its proprietary sever products. These will come under increasing pressure next year for more efficient producers. SUNW has never been adept at selling applications software so I do not expect them to generate much profit from those activities. I do trade the momentum stocks and have done well with them. But I also look for companies which in time will dominate their industries as MSFT and INTC. The NPV calculation in the referenced article used "operating cash flow" instead of "free cash flow" and this is a not a correct use of the discounted cashflow valuation method as it ignores SUNW's substantial acquisition costs. Regards, Jim Kelley