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

To: The Phoenix who wrote (38723)	8/1/2000 10:36:51 AM
From: GVTucker	Respond to of 77398

Gary, RE: I know this is herasy but the fact is retirement dollars are competing for a finite asset pool and thus prices are bid up beyond what would seem "normal" from a historical view. This is why I think that valuation measures are still very important, and why in the end, cash flows matter. The asset pool is not 'finite'. It is infinite. The pool is expanded to meet the demand. That's why you saw so many dot com IPO's last year. There was demand. And that is why the last people in the pool had a difficult time swimming. Now look at the pools of billions of dollars of capital at places like Charles River Ventures, or Battery Ventures, or Columbia Capital, or Providence Equity Partners. These are very smart people, and just like you, they saw the potential of the growth of Internet infrastructure, and the valuations that can be realized by selling a start up infrastructure venture to companies like CSCO, NT or LU. What happens? The float of a company like CSCO gets to 7 billion shares, enough for everybody in the world to own a shares. Even if you adjust for splits, that is 2 billion more shares than 5 years ago, and 3 billion more shares than a decade ago. The supply grows to meet the demand. And those very bright venture capital groups are waiting anxiously for their lock ups to expire so that they can realize cash out of the deal. The thought that supply and demand matter more than valuation rises every so often in capital markets, usually in response to a sharp move in valuation. This concept isn't new, but rather is as old as the New York Stock Exchange. Edit: Please don't misinterpret my comment on the dot com madness to mean that investing in CSCO now is as risky as investing in KOOP or PPOD. But the probability of CSCO hitting 100 this year is very low. And the probability of CSCO hitting 100 next year is very low. And the probability of CSCO hitting 100 in 2002 is still very low. In the end it is the valuation that matters. Supply can change in a heartbeat, and often demand follows.

To: The Phoenix who wrote (38723)	8/1/2000 11:20:57 AM
From: lawdog	Respond to of 77398

When you are paying with play money $1mil isn't that much, gary. Of course this may not last but I can tell you from first hand knowldege I never thought I'd see a tract home in San Jose go for $1M and now many do.

To: The Phoenix who wrote (38723)	8/1/2000 12:08:15 PM
From: Uncle Frank	Read Replies (1) \| Respond to of 77398

>> I never thought I'd see a tract home in San Jose go for $1M and now many do. Been out to Silver Creek lately? I'm hoping Cisco gets construction going on Coyote Valley soon. It will make home equity a major component of my retirement program, as Almaden Valley will become the commute equivalent of Saratogo to Silicon Valley <lol>. Anybody going to the SI anniversary party this Friday? uf

To: The Phoenix who wrote (38723)	8/1/2000 10:20:09 PM
From: Adam Nash	Respond to of 77398

P/E ratios are always just an approximation, a simplistic way of approaching a true fundamental valuation based on discounted free cash flows distributed to debt and equity holders. With Cisco, I think what you would see over the past few years is not the estimate of future cash flows changing so drastically (after all, the companies financials have been in lock-step with predictions for an awfully long time), but rather the general discount rate applied to those flows. The problem with this conceptually is that if this analysis is correct, and Cisco really deserves a lower discount rate, that implies that returns for the stock going forward will be much lower going forward. Of course, the catch-22 is that if this analysis is wrong, then the discount rate may expand, hurting the returns from this point for current longs even more. This, of course, is making the rather large assumption that people are actually using some form of rational analysis, in aggregate, when they trade in CSCO. We can leave that for an academic discussion some other time.