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Strategies & Market Trends : MDA - Market Direction Analysis -- Ignore unavailable to you. Want to Upgrade?

To: Haim R. Branisteanu who wrote (40223)	2/13/2000 7:50:00 PM
From: Logain Ablar	Respond to of 99985

Hi Haim: Thanks for the response. When one looks at historical PE's a factor often over looked is the tax rate. We've gone from a 20% capital gain rate (and 6 month holding period) when the top bracket was 70% to a 28% rate (with 12 month period) back to 20% rate (but AMT). I would rather own a stock growing earnings and not paying dividends and take my gains through appreciation at the lower AFIT rate. I know this assumes the stock price is appreciating but the GE's, MSFT's & CSCO's of the world do a better job with the investments vs. the AET's of the world. So I think you can expect the market pendulum to swing to a higher PE in this type of environment before it reverts to the mean. A lot of variables and I'm sure I'm missing plenty. Have a good nite. Tim

To: Haim R. Branisteanu who wrote (40223)	2/13/2000 7:59:00 PM
From: Benkea	Respond to of 99985

haim: "Adding the option pay to wage cost will increase employee compensation by at least 10% which will actually wipe out any real pretax profits. So most High Tech Companies such as CSCO or MSFT or many others do not earn any pretax income as all income is first distributed to their own employees and mostly to management." To further illustrate your point: CSCO's stock appreciated $31 per share in the quarter just reported. This increased the value of outstanding options in excess of $8 bil in the quarter. So compensation expense (which is what it is - what else is it?) was 2X REVENUES and 10X net income in the quarter. Boy, that is some kinda profitable company (for employees maybe). Incidentally, the same can be said for MSFT, YHOO, as well as most of the other pyramids.