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

To: Gary Sanders who wrote (47779)	4/23/2000 2:22:00 PM
From: Square_Dealings	Read Replies (1) \| Respond to of 99985

re: "the world has changed" Subscribers to thestreet.com should check out the lengthy interview with Peter Canelo of Morgan Stanley. <<The boom in babies in this country occurred between 1952 and 1964. We had 4.5 million babies every year or more. Those babies are today 35 to 47 years of age. Fact No. 2: The American consumer spends the maximum money when the head of the household is in his or her late 40s, approximately 46, 47 years of age. All of these statistics are borne out by the consumption expenditures surveys of 1998. Every year, you can see that the boom in spending in the 45 to 54 age bracket. So as the American consumer moves into the maximum spending bracket over the next decade, we will see a consumption boom. It just started. Think of it this way: If you add 46, 47 years to 1952, the beginning of the baby boom, we should begin to see a big surge in spending at that time. If you add 46, 47 years to 1964, the end of the baby boom, that should be the end of the spending surge. You should see the biggest boom in American consumption between the years of 1998 and 2010 and it should peak in 2007 and 2008. It has nothing to do with the stock market. It's people sending kids to college, paying for room and board, buying the big house, buying the big car, helping mom and dad with retirement. This is lifestyle stuff, it has nothing to do with the Federal Reserve or the Dow Jones average. It is something else again. And to tighten monetary policy because you think there's excessive speculation, which is in itself false, doesn't make much sense. I say there's not excessive speculation, because most of the market did nothing for two years. And it was only the Nasdaq, but the market took care of that one. Geoff Lewis: What about the overvalued tech stocks? You point out how quickly they rose. Peter Canelo: Well, this is another interesting thing. We're splitting up the Nasdaq into those companies that have earnings and those that do not. And I was shocked that those that have earnings are trading at an 18 P/E less than the S&P. People say you have a very high P/E for the Nasdaq. We don't even know that, because a lot of those with negative earnings don't have projections for earnings -- nobody follows these stocks. But for the stocks that we follow, the P/E has really come down. The secondary stocks are down 40%. So you come down to 18 times earnings. I don't think that's a problem. . . If Coca-Cola (KO:NYSE - news - boards) is overvalued, it's got a 40 P/E and an 8% growth rate. I mean, 8, forget about 8 -- it's going to take five years for the earnings to catch up with the P/E. But these tech stocks have been growing earnings at 35% a year last year, 35% this year. Just wait three, four, five months and your valuation problem disappears. I won't make the same statement for the secondary names. Some of these guys don't even have earnings, so it is a little more confusing. And, arguably, there's more over valuation in the dot-com area, where they don't even have a business that's viable. There are some speculative problems, no question about that. Primarily I focus on the S&P and I think overall the market's undervalued, moderately. The techs are only slightly overvalued. So it may take some time, but eventually we're going to go higher. >>>>>>>>>>>>>>>>>