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To: ItsAllCyclical who wrote (82227)	12/20/2000 8:23:16 PM
From: inchingup	Read Replies (2) \| Respond to of 95453

-Valuation are returning to normal historic levels in some cases, but I still wouldn't call the valuations historically cheap.- CNBC mentioned after the close today that the Naz P/E was still 86:1. A bit more downside potential perhaps? (VBG).

To: ItsAllCyclical who wrote (82227)	12/21/2000 12:05:19 AM
From: cnyndwllr	Read Replies (3) \| Respond to of 95453

JimL, I like the time and approach you are taking to analyze this downturn in tech. I don't think most would argue that the big bucks will be made in tech when this general market turns and that it will turn. If it doesn't turn then we are all the poorer for it since it will drag oil down also. I too am trying to figure out what will make it change direction and what indicators will be key indicators of a basic change in mrkt direction. Are there any of you conservative political thinkers that have recovered from your emotional journey into politics enough to help me out? It's a complex issue that begs to be broken down into manageable segments. I'm thinking that if the primary factors in the strength of the downturn are evaluated and then the additional factors that such a severe downturn cause are considered, it may be possible to make a pretty good prediction of the turning point. I THINK THE FOLLOWING FACTORS ARE CRITICALLY RELEVANT: 1 The tech revolution took hold creating new demand and greater productivity and justifying higher multiples in select segments of the market. 2 The fed pushed on the gas too hard at the end of 1999 in the face of a downturn and y2k and created too much liquidity and thus demand which, coupled with improving world markets and technological advances that led to increased demand and productivity, promoted explosive and unsustainable growth. 3 In the middle of 2000 the fed pushed on the brakes too hard with interest rate raises that slowed demand at a time when energy prices rose exponentially, creating the double whammy of an energy price like "tax" and rising interest rates. Because of the after effects of the earlier fed actions and the "wealth effect" and euphoria in the markets and full employment in the economy, the slowdown was slow to materialize and the fed braked harder creating a cumulative effect when the slowdown took hold. 4 In the interim there was a lot of mo-mo and stupid money that charged into the market and ran prices up higher and higher for such an extended period of time that the perception of "fair value" changed from historical norms. 5 Analysts and brokerages were able to manipulate individual stocks and the general market with their pronouncements, creating persistent swings in the individual stocks and the general markets. 6 The market allowed for the sharing of information and the perception of trends on a minute by minute basis, or even second by second basis for large investing institutions with computer programs, which accelerate all trends and may amplify them. 7 The major oscillating moves in the general market trend were institutionally driven by major investors and funds. SO WHAT HAS CHANGED? 1 A loss of credibility in the analysts and the loss of confidence of investors in their ability to understand the general market. A lessening of the power of the analysts to manipulate investors for the purpose of causing swings in the market. 2 A lot of stupid money lost and now in the hands of smarter investors with a corresponding resurgence of fundamental analysis. 3 A fed chairman and board that will likely be much more gentle in pressing on the brakes or the gas the next time around. 4 Energy availability which is not visibly or appreciably responding to increased prices but is facing the strong possibility of lessening demand. 5 The technical charts for the nasdak market must be historically unique. 6 The fundamentals for those tech firms with positive earnings are now generally sound and with most small and mid caps, compelling. 7 Business and individuals are much more cautious on lending and investing while the economy sorts itself out. SO WHAT HASN'T CHANGED? 1 The tech long term outlook looks as good as ever with the exception of some internet models which had no barrier to entry and which had no revenue capability built into them. 2 Any changes in the direction of the market are likely to remain sharp and strong. 3 All major oscillating moves in the market will likely remain institutionally driven. 4 The fed will intervene and will do it with interest rates, but I believe more cautiously in order to create a less extreme reaction when it takes hold and also because the energy problem acts as a brake on the ability to create manufacturing demand through liquidity. 5 A business friendly administration is in power and tax cuts are likely. Here's my thinking at this late night moment. Other than the fed intervention, what is near term that could drive stock prices up? With the number and severity of the warnings, it is clear that this is not a company specific or industry specific tech slowdown but one that is affecting virtually all tech sectors and therefor the entire economy and there will not likely be a tech earnings recovery for months. I assume that at some point the technical indicators, the fed intervention, a lessening of the energy crisis, tax cuts, improving fundamentals etc will lead the institutions to jump in with both feet. I want to be there when that happens. So my question is, are these the factors you are looking at? What would you add or delete? Most importantly, what are you using to determine when the institutions will move and what will trigger their willingness to jump back into the tech market? Any thoughts? Ed PS. When the recovery happens I intend to take full credit, for predicting it and for the recovery itself. Somehow, some way, I will get that credit. Just as the doorman said to Alice, "The words mean what I mean them to say," or possibly something very similiar to that may have been said by someone to someone in that story.