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Politics : High Tolerance Plasticity -- Ignore unavailable to you. Want to Upgrade?

To: Sweet Ol who wrote (1556)	3/13/2001 10:29:10 PM
From: Razorbak	Respond to of 23153

NASDAQ P/E Here is an interesting argument made by Kevin Podsiadlik, a respected poster on the Tulipomania thread... >>> I've heard various estimates of their current aggregate P/E, but the average estimates are around 100 (if this is inaccurate, please point me to a data source). That's still about 5x or more the long-term historical average. So should we be surprised if the Nasdaq index springs back to that historical average and falls to 400? <<< The flaw in this reasoning stems from the projection that because a "standard" P/E ratio for a stock is considered to be 20, that the market as a whole should trade at that level. The problem is that this makes no provision for companies that are losing money, a group which currently makes up almost half of the Nasdaq listings. In fact, among Nasdaq listed companies showing a profit, less than 2% trade at P/E ratios of 100 or more. To make the "aggregate market" trade at 20 times earnings, I estimate profitable companies would have to trade at an average of about 7 times earnings, to make up for their money-losing bretheren who, through no fault of their own, do not trade at a negative share price. Put another way, the CSCOs and INTCs have been quite severely in their own right over the past year. Is it reasonable to punish them further every time a money-hungry underwriter foists an ALGN (earnings of negative $43.26/share) on the market, thus further depresssing "aggregate earnings"? The only way we can reduce the "aggregate P/E" of the Nasdaq to a non-eye-popping level is to weed out (delist) companies that are losing money and have little prospect of ever doing so. This process is finally getting underway in earnest, and IMO it can continue with relatively little damage (relative, that is, to your scenario of an 80-95% decline even from this level) to the overall averages. Message 15496642

To: Sweet Ol who wrote (1556)	3/14/2001 12:01:14 AM
From: cnyndwllr	Respond to of 23153

John, about your post on some stuff from the MDD thread, does MDD stand for "manic depressive deathwatch?" It should cause that's where I'll be if I read another 4 in a row like that. In one sitting we get the specter of consumer spending meltdown, Japan meltdown, all major index chart patterns meltdown and, for good measure, no cure. Unfortunately, it all makes some kind of sense. I think the truth of the basic premise that things cannot grow forever is inevitable if you look far enough ahead. At some point consumption, population, use of natural resources, etc. has to slow, stop and maybe even reverse. The question is when? I think the answer may be "not now," at least as far as a long term decline and flattening of our growth. The world is too information hungry. Too many foreign markets are needy and greedy for imports and exports. Too many previously restricted societies, both economically and politically, are now less restricted and anxious to produce and consume their way to a better life for themselves and their families. A huge part of those markets will pass through companies listed on our stock exchanges and result in profits for the companies we hold. The combination of technological advances and increased economic freedoms throughout the world is unique in history. Unless we find some way to blow it, I think that we will grow for some years to come but not, of course, in a straight line. The question of whether we have grown too fast and need a longer break to get back in balance is a tough one. I believe it all depends on the availability of energy resources and the adroitness of the central banks in managing not only the economies, but also the perception of the economies. Having said all that, I also have to say that I am more scared than before after reading your information and I think that's a good thing. Thanks, and keep the cautions coming. Ed

To: Sweet Ol who wrote (1556)	3/14/2001 2:28:39 AM
From: energyplay	Read Replies (3) \| Respond to of 23153

An feeling of fear but not yet panic... seems to prevade. Went out to dinner in Sunnyvale, CA (Silicon Valley) this evening- lots of conversations about the market. A little more of a drop or negative news and some people will start to throw in the towel. The markets have seemed funny the past few days - not just down, but different. Like there's something big and nasty just offstage (Japan ? something else ? I don't know) I would have expected sharper drops from more aggresive shorting, and a little more dynamism to some of the rallies. I feels like some of the key players have quietly left the building before something goes down... I feel some thing will happen in about two weeks - doesn't need to be tomorrow. I'm sitting in about 80% bonds and cash, and feeling very uneasy... Does anyone else sense this, or have a more rational view ? I thought John R Haley's list of nightmares was useful. By the way, I don't like that diamond pattern in the dow...