Silicon Investor (SI) -- The First Internet Community

STOCKTALK

We've detected that you're using an ad content blocking browser plug-in or feature. Ads provide a critical source of revenue to the continued operation of Silicon Investor. We ask that you disable ad blocking while on Silicon Investor in the best interests of our community. If you are not using an ad blocker but are still receiving this message, make sure your browser's tracking protection is set to the 'standard' level.

Technology Stocks : Cisco Systems, Inc. (CSCO) -- Ignore unavailable to you. Want to Upgrade?

To: RetiredNow who wrote (36794)	5/31/2000 6:08:00 PM
From: bambs	Read Replies (3) \| Respond to of 77400

Mindmeld, I think we will have to agree to disagree and wait and see. I see companies like CSCO trading with P/E's that can only justified by a white hot economy. I think when you look at the fundamentals you will find that CSCO will have to grow by 50% a year every year for 5 years and still trade with a P/E of 50 to be a worth while investment at this level. I argue that old economy companies will be suffering soon. These companies will put off upgrading their network, computers and avoid spending money everywhere. With higher interest rates and a slowing economy I.T. professionals will have a harder time selling that new project they want done. I believe that the business cases of many upgrades and roll outs will be questioned in the coming months at many companies. Many people argue that companies must upgrade and improve their I.T. departments to compete. I think that that is true for some companies in some sectors. But, for many the business case to go broadband isn't there. The business case to get the company off Pentium II's and Windows 98 to Pentium III's with Windows 2000 isn't there. I don't think that these growth stocks are going to grow like investors where expecting and I think the expectations where too high to begin with. I think that this will become clearer in the coming months as this market and economy continues to unwind. I think we will have the "hard landing" that some people are beginning to talk about. I think that Greenspan will raise interest rates at the next FOMC meeting and will not give the impression that the end is in site. I also think that the account practices of these new economy stocks will come back to haunt them. The mark to market gains from investments have given a false impression of earnings for many tech companies. The granting of stock options with out accounting for the cost also are misleading. How will earnings look when their are mark to market losses next quarter. How will the ever trusting public react to drastically lower earnings growth on thier beloved growth stocks! Or for that matter...increased losses! We shall see. Respectfully yours, Bambs P.S. Isn't it much more useful to discuss our opinions instead of attacking each other? Why don't the longs of this board ever step up and tell spammers like Mike to get their garbage waste of time posts off this thread. Oh, by the way... I'm going to make up a list of the ways that this market and the 1929 market are very similar.

To: RetiredNow who wrote (36794)	6/1/2000 7:36:00 AM
From: GVTucker	Read Replies (2) \| Respond to of 77400

mindmeld, RE: This fundamental concept once grasped will allow you to realize why long term holders of Nortel and Cisco could care less about these rate hikes. They just don't matter. Rates do matter to long term holders, particularly for a stock like Cisco. When you pay 100x earnings for a company, you are counting on earnings far out to justify holding the stock today. The higher rates go, the less those far out earnings are worth today. $1 of earnings 10 years out is worth 48½ if you use 7.5% as a discount factor. It is worth 38½ if you use 10%. Looking even further to the future, high rates render earnings 20 years hence close to zero today. Rates do matter. If you don't care about rates personally, it will be to your detriment.