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To: LLCF who wrote (695)	6/26/2000 12:25:00 AM
From: UnBelievable	Respond to of 436258

At What Rate Does a Market Really Grow? There is not much that isn't flawed. His insinuation that the results are equally, if not even more, applicable to the technology rich NAZ is a total sham (Ten-year P/E multiples are sort of like using a rotary phone to dial into the Internet, or Technology investment, the driving force behind productivity surge, or the internet economy was taking over...). More fundamentally his methodology for capitalizing expected future earning is filled with bad assumptions and selective use of data. (Corrections come and go...bond rate are heading down and Federal Reserve liquidity withdrawals and interest rate hikes have modestly raised financing costs, or Market price indicators of lower future inflation suggest reduced interest rates ahead) His failure to discuss the effect of the waning of US World hegemony, as well as likely cyclical economic factors which can be expected to come into play (Credit - both Business and Consumer as at record high levels notwithstanding the fact that we are towards the end of one of the most protracted economic growth cycles we have ever experienced)is seriously lacking. I think you will find the following discussion of stock price a bit more carefully thought through. "One of their more compelling points is based on the fact that corporate America's average annual return on equity over the last 50 years has been 11.9 percent, nearly three percentage points lower than the stock market's average return over that period." "If the market's expected return is greater than a company's return on equity, the rational thing for the company to do is close up shop and invest its assets in the stock market. Alert balance sheet readers will note that, because the market's expected return is also the rate at which a company's future income stream is discounted for valuation purposes, the present value of such a company's future earnings would be negative." nytimes.com