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Politics : Idea Of The Day -- Ignore unavailable to you. Want to Upgrade?

To: the options strategist who wrote (31395)	5/8/2000 6:46:00 PM
From: IQBAL LATIF	Read Replies (1) \| Respond to of 50167

On a low volume this was rotation which we have talking about in Feb March and recently think that this is over as higher interest rates after correction may help the techs better and financials less, although we believe like that market is going through a rethink of the whole process of valuation, the reasons bkx shot up on a low volume day was that if you look at P/E's and compare them with the growth of the financials you would notice that P/E's ranges from 11 to 26 average P/E would be 18 for Bkx, also Bkx since Nov of 97 has stayed around these levels where it is today, although lot of growth has happened in the sector since last 30 months but financials have bore the full brunt of ASEAN crisis, than 'deflationary threats than LTCM crisis and now the rising interest rates environment, now once you compare the sectors on lofty valuation models you find that banks are more secure and offer better PE/PEG ratio.. please look at the charts and also the P/E's.. quote.yahoo.com Now what was sold today was CSCO's EMC's and SUNW's now if you go back on these pages you would find that we have argued that may be rising interest rates may hurt the discount of the future cash flow to present values far more, this was when I was talking about closing of the gap between DOW and Comp, now today the market was looking at the valuations and worrying about sustainability of these high P/E's, the market thinks that the major tech caps would have difficulty in maintaning present growth rate and hence the P/E's are unjustifiable..that led to sell off.. siliconinvestor.com. Since last week my position is that rising interest rates after correction will help the techs, until the next FOMC and more economic data we may see as james have pointed out test of 3400 or even old lows but I would assume that until valuation models are completely discarded today action amidst low volume may have been short term phenomenon, if this continues like MSFT kind of action the market will suffer atleast another 10% to 15% correction in total market cap, for CSCO to be cut to size like MSFT we need a shave of 225 billion put in 50 each from SUNW and EMC and add up the other smaller it adds up to a cool trillion that is 8% of 13 trillion total cpa add osme panic and you are looking at 15% coorection from here if CSCO valuation model becomes a suspect, for me if this is going to be the basis of big cap techs prepare for far more serious sell offs, I think after CSCO earnings we will see how the markets are prepared to look at these stocks.. I would thik that low P/E's and good growth stocks have a good future if see a correction in big caps that rally will than include big caps in finacials, KO type YUM MCD, drugs and in techs CS CPWR TLAB kind of stocks... The oils were up and transportation rallied look at the P/E's and look at the transportation index where it is in last five years we are at 97 level as if all this economic growth have completely bypassed these stocks, so in panic people run to AMR's and UAL's and UPS's of the day some of them as you notice have P/Es of as low as 5 or 6.. flight to quality may be today .. it may be market regains its exotic definition of stock valuation post CSCO earnings the story than would be quite different, .. For me my strategy needs a rethink if the market is not prepared to discount the future cash flow to present value using 'growth' as an integral factor its reliance on lower risk premiums, the article on CSCO has raised basic structural issues and we need to focus and rethink if the basic assumptions are being changed, if these assumptions are abondoned we will see PSE at 750 and that would require new strategy for us.. however I am watching and learning the treachery moves , for me it is a game I like to play and understand in a very simplistic manner some time nearing banality but I think this rising interest rates and change of valuation model for us here is of great importance.. JJ.. it is past midnight here I have to sleep and I did not even read what I wrote after I read your question, please overlook glaring oversights..I thought that I should reply to your very important question asap..