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To: Casaubon who wrote (40593)	2/18/2000 8:31:00 AM
From: KyrosL	Read Replies (1) \| Respond to of 99985

it doesn't effect high growth companies with very low or no debt. While it may not affect very much the earnings of such companies, it certainly affects (or rather should affect) their valuations. You see, a company's value is (or rather should be) the discounted present value of all of that company's future expected earnings. So, rising interest rates greatly reduce that discounted value. So, in a rational world, rising interest rates should hit high p/e companies' stock much more than low p/e companies' stock.

To: Casaubon who wrote (40593)	2/18/2000 1:50:00 PM
From: Jacob Snyder	Read Replies (1) \| Respond to of 99985

re: interest rate increases not affecting companies without debt. Yes, it does, because their customers (and the customers of their customers) have debt, and are affected by rising interest rates. The effect spreads throughout the economy, concentrated on companies whose products are not necessities. For instance: If Intel wants to build another billion $ fab, they pay cash for it. Rising interest rates mean more interest income for Intel. Is this good for Intel? No, it isn't, because rising interest rates mean people are going to be spending more on things like mortgages, and have less disposable income for non-necessities, like PCs. The Fed has said, over and over for the last 6 months, that they will be raising interest rates until consumption slows. When that happens, companies and individuals will, at the margin, decide to put off upgrading their computer systems. That's why, last month, I sold my INTC LEAPs, and have been accumulating LEAPs in BSX. BSX is a medical equipment maker, selling at the low end of their P/S, P/E range. When consumption slows in the overall economy, it won't affect the sales of catheters to open up heart arteries. BSX has a Long-term-debt to equity of 30%, but will be less affected by rising interest rates than Intel.