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To: Danny who wrote (110446)	10/13/2000 4:34:08 PM
From: re3	Respond to of 164684

Message 14577085

To: Danny who wrote (110446)	10/13/2000 4:42:53 PM
From: Eric Wells	Read Replies (2) \| Respond to of 164684

241 point on NASDAQ, over 2B in volume. We have seen the bottom! So Danny, what is your forecast for the next few weeks. Do we continue to go up? Do we go back to Nasdaq 4000? -Eric

To: Danny who wrote (110446)	10/13/2000 5:35:07 PM
From: GST	Read Replies (2) \| Respond to of 164684

Danny: I don't expect to see 2000, but I do not see any reasoning behind your statement. In the event of a recession, earnings will become more important. Those companies with poor earnings prospects get completely trashed -- and there are some big companies out there with little to show in earnings. Companies that do have earnings will have lower earnings and slower growth rates -- a double whammy. Say, for example, a company is trading at 50 times earnings of $1 with an earnings growth rate of 25% per year. Then the earnings growth slows down and earnings drop in a recession to $.50. There would most likely be a multiple contraction of (for example) 50%, which, combined with the drop in actual earnings, would take the stock price from 50x$1=$50, to 25x$.50= $12.50. Perhaps this is news to you? If this reflects the "average" Nasdaq company, and it might, then we would drop from 3200 down to 1000. Again, this is not a prediction. But there is nothing in my mind which suggest this is not entirely within the realm of the possible. There is nothing crazy about talking about this as a real possibility. This is what the Nasdaq would look like in a recession. BTW, a war in the middle east and a spike in oil prices would vastly increase the odds of this scenario. We are not our of those woods just yet. The oil prices we have now are causing us to skirt the abyss -- good luck.

To: Danny who wrote (110446)	10/13/2000 7:29:41 PM
From: Robert Rose	Respond to of 164684

<We have seen the bottom! > For now.

To: Danny who wrote (110446)	10/17/2000 10:49:56 AM
From: Alomex	Read Replies (1) \| Respond to of 164684

Eric, to be honest, any claim of NASDAQ below 2000 sounds absurd to me at this point. Is Nasdaq as cheap as it seems? globeandmail.com ERIC REGULY Tuesday, October 17, 2000 When the Nasdaq market soared by a near-record 7.9 per cent Friday, the bulls felt vindicated. Here was proof that stocks, notably of the tech variety, had become truly cheap. But "cheap" is a relative term. Sure, Nasdaq stocks are about 35 per cent below their peak, but this doesn't necessarily mean the worst is over. Valuations are still very high by historical standards and the investment climate is hardly benign. The optimists say the bubble has already burst and it's safe to buy again. The pessimists say the bubble has only begun to deflate. The rah-rah crowd, whose members include the momentum players and the Type-A-personality mutual funds, forget just how stretched the Nasdaq bubble became. A year ago this week, the Nasdaq composite index was trading at just above 2,600. Over the next five months, it almost doubled, reaching a peak of 5,132 on March 10. Now it's trading at about 3,300. While that's down 19 per cent since the start of the year, it's still well above its October, 1999, level. The question is this: If markets can overshoot so much on the upside, what is to prevent them from doing the same on the downside? If this happens, Nasdaq could easily lose another 500 to 1,000 points before it levels off. The unwinding process began with the weak and speculative tech names. Some of them are down 90 per cent. Then it hit the secondary names, some of which are off 50 per cent or so. Now the superstars like Nortel and Cisco are getting hit. Mighty Nortel, trading yesterday at about $102, is about 18 per cent off its peak. Cisco is 34 per cent below its year high. Whether Nortel and Cisco will lose more ground is impossible to determine, but we do know that their price-to-earnings multiples -- 92 and 73, respectively -- are lavish by historical standards. To justify such multiples, the companies will have to keep growing at extraordinary rates. With economic growth slowing around the world, this may be impossible. The stock markets in general, in fact, are still high by historical standards. The S&P 500 index, for example, trades at about 26 times trailing 12-month earnings. While it has been higher -- the peak was 34 times in June of last year -- it's still well above its average of 15 since the Second World War. The tech stocks on the S&P 500 are especially high compared with the index as a whole. Their trailing P/E ratio is about 44. What could trigger another Nasdaq plunge? Stocks have been priced for perfection for so long that any bout of bad news could do the trick. Rising energy prices, the renewed potential for war in the Middle East and missed profit forecasts help to raise anxiety levels. First Call/Thomson Financial reports that profit warnings in the current quarter are 27 per cent ahead of last year. Finally, investors are becoming confused by the simultaneous barrage of inflationary and deflationary signals. Prices for commodities such as pulp and paper and nickel are in decline as global economic growth slows. This has a deflationary effect. At the same time, oil prices are rising -- they have trebled since their 1998 low -- which has the opposite effect. The inflationary pressures could lead to a situation where the Fed cannot lower interest rates even if the U.S. economy slows down. The similarities to 1973 are hard to escape. The Dow peaked in January of that year and the "Nifty 50" stocks gave the appearance that the overall market was stronger than it really was, just as the high-flying tech stocks of today mask poorer performance elsewhere. The whole thing finally unravelled as oil prices first rose, then spiked sharply higher during the Arab oil embargo. When confidence evaporates, stock market declines can be sudden and deep. The markets are currently being propped up by net inflows of cash, thanks to the more aggressive mutual funds and the momentum players. They certainly didn't buy the stocks for fundamental reasons; they bought simply because the stocks were going up. The danger is that the inflows will dry up when the same investors who sent the markets up in a hurry, as they did with Nasdaq, will drive them down equally fast once they lose their nerve. Since many of these investors have no idea what their holdings are really worth -- P/E ratios are largely irrelevant to them -- the danger is they will drive prices below their legitimate value. In this case, the market's natural floor ceases to exist. In spite of the selloff since March, Nasdaq may not be as cheap as it appears. At this stage, caution probably remains the most sensible strategy. Readers can send e-mail to ereguly@globeandmail.ca