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

To: johnsto1 who wrote (51601)	5/22/2000 3:23:00 AM
From: westes	Respond to of 99985

At least you used a good acquisition story. NTT has some real value, so whether they pay cash or stock their currency is real. This would be in contrast to Cisco's acquisitions, where paying billions for very little means nothing because the currency used is also overvalued by an order of magnitude. Ultimately the purpose of any investment is to produce economic flows that exceed what you put in. That means we should be able to take the net earnings, after taxes, and calculate those out for the next 10 or 15 years, apply some sort of present value analysis, and the value of all of those cash streams had better exceed what you put in. If it doesn't, then what exactly is the purpose of investing? Have we reduced the entire exercise to a popularity contest? "Gee, my dot.com telecom company has a real swell technology and their router has less latency than the other 10 optical router companies that they will compete against for the same 20 customers. Better give those guys a valuation that assumes 300% growth for the next 20 years, because someone somewhere will sure make a lot of money in this market." That's the kind of analysis that gives an excellent company like JNPR a 25 Billion dollar valuation against a mere 156M in sales. By my calculations they have to grow over 100% per year for another 8 years to grow into that valuation using net margins of 20% (that's better than Cisco!) and ending in year eight with a P/E of 100. Does any right thinking person believe that this market can grow at 100% per year indefinitely, with virtually no competition to dampen growth or net margins? It must be nice this dream world you live in. :) It's gotten to the point in the stock market where virtually every tech company has been valued using the same kind of lame pseudo thinking: take the best possible outcome, do a cash flow for 10 years assuming Cisco like growth and Microsoft-like margins, and whatever numbers pop out that's what they are worth today. This thinking is of course, false. 95% of these companies cannot sustain their growth because competition will arise. Many will never be profitable at all. And it is outright dangerous to our economy's future to value every one of them as if they are Cisco. The classic sign of an asset bubble is that at some point everyone stops talking about how to convert the asset's price into some kind of economic flows or earnings that get investors back the money they paid in. Instead, everyone focuses on earnings as if they have some kind of magical abstract value wholly apart from the price paid for the asset. I must have reviewed 300 NASDAQ stocks and their news stories in the last two weeks. I don't think there was a single news story for a single company that even discussed how the earnings for the company related to the value paid for the asset. No one even talks about P/E ratios any more, because they are simply too absurd in many cases to make possible any discussion of value. You can't do the cash flow analysis with many of these companies, because simply there are no reasonable assumptions that ever have that company generating after-tax earnings in quantities great enough to return back the investor's money. No one on Wall Street is going to tell you that. They just want the perpetual love-in to go on and on. All I can say is that we had all better pray and hope that the Fed crushes this market to a level from which continued growth can be nurtured on a healthy and continuous basis. Because God forbid if this thing takes off again and hits 5000 any time soon, and then the economic cycle goes into a downturn (maybe because of an external event like an OPEC oil supply squeeze). Because then we will be in a place from which there is no easy recovery. If this market implodes from an artificially high level during an economic downturn, no amount of Fed interest rate lowerings are going to stop the contraction that will result, because interest rate decreases are notoriously ineffective at stopping contractions (to contrast increase rate increases are very reliable as a way to STOP growth). And if you have that kind of asset contraction on top of an economic contraction, you have 1929, and that means NASDAQ 300 not NASDAQ 2600. I for one am glad that the Fed is getting this job done now, during an economic up cycle. This thing needs to be lower, and I think we have a very reasonable chance of a soft landing at NASDAQ 2600 to 2000, and for a continued run in the bull market for another 10 years. I'm an optimist that it will happen that way.

To: johnsto1 who wrote (51601)	5/22/2000 9:13:00 AM
From: bobby beara	Read Replies (2) \| Respond to of 99985

>>>absurd I find comparing arrowhead and hammer with the ability for data to travel faster than light<<< now where hell was i comparing those things, you are rich -ggg-

To: johnsto1 who wrote (51601)	5/22/2000 9:17:00 AM
From: lawdog	Respond to of 99985

Einstein would be very surprised. <g> "...with the ability for data to travel faster than light. "

To: johnsto1 who wrote (51601)	5/22/2000 9:27:00 AM
From: Box-By-The-Riviera™	Read Replies (1) \| Respond to of 99985

you said: When VRIO is bought for 5 Billion cash that's paying for a proven product without having to pay the Billions on unproven R&D. How do charts and PEs figure in the value of proven R&D for revolutionary technology? that they are paying too much, doesn't support by any reasonable measure, a pro-future value stance... next you'll by telling us the 12.5 billion purchase by folks outside the USA was a good deal, or at the least, a rational deal? Value will ultimately find a truely argueable basis, and probably sometime soon, not 10-20 years from now when future value approaches begin to resemble a reasonable, even with premium, real present value... and none of it will have much at all to do with data traveling at the speed of light.... rather good business, good growth, good profits, good cash generation, good solidly based appreciation of capital ad nauseum. J