To: Earlie who wrote (76619 ) 2/26/2000 2:44:00 PM From: Zeev Hed Read Replies (2) | Respond to
Earlie, I am not sure if RMBS is a $15 to $20 stock, but it has reached what I considered last November a high (I had $37.5 for the low, if further delays of the 820 were to occur and $222 for the high, it reached $224), after two gravestone doji last week, it might even be ripe for a major retrenchment. To get down to $15, you'll have to assume PE contractions to the neighborhood of 15/20 of 2001 earnings, since even under a worse case scenario, they should be able to approach a buck in 2001. I do not think that PE contractions of this magnitude occur at once, the whole market will have to undergo few cycles of bear moves followed by bull moves in which process PE ratio in general, and thus RMBS' PR as well will contract to more rational levels. Of course, a bearish stand at current levels (that are twice what they were when we had this discussion just few short weeks ago) is much easier to justify in face of the high valuation and some of the uncertainties, yet, if I was inclined to short, I would wait for either a confirmation that $224 is a top (running up there without making a new high), or a break under at least $170. As a betting man, I still think that there are better shorts out there (VBG).
