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Technology Stocks : IBM -- Ignore unavailable to you. Want to Upgrade?

To: Robert Scott Diver who wrote (6213)	3/1/2000 9:59:00 AM
From: David W. Taylor	Read Replies (2) \| Respond to of 8218

To get to $60, I am assuming a P/E of around 15, which has been typical for the entire market including IBM until about 3 years ago. If you accept that P/E's of 25 are now warranted, you would get to 25 or today's number. Remember that IBM is simply the largest generic provider of technology goods and services. With a P/E of 15, it would remain competitive to a fixed income investment in a "risk-free" world at around 6 percent. With a 25 P/E, equivalent to 4%, it is less attractive in that "risk-free" world. Since we all know that there are risks in owning equities, logic says you should pay a less than fixed income prices, which are risk free in reality. This is probably less than resonant for most people but it is essential to think this way for long-term survival.

To: Robert Scott Diver who wrote (6213)	3/1/2000 10:13:00 AM
From: David W. Taylor	Read Replies (1) \| Respond to of 8218

One other thing. The majority of analysts as Fleck calls them are simply "dead fish." They know little about what they cover and are often simply cheerleaders for the stock, who issue new price targets to see if the market will like the new number without doing any actual research. Remember that when interest rates are headed higher, it is easier to reach a reasonable growth rate of around 5-6% after inflation with non-equity investments, so there is less need to pay more for less in the stock markets. Given the high holding of IBM by institutions, this sum is being done every day and will tend to drive the price of the shares back to regular levels over time.