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Strategies & Market Trends : Trader J's Inner Circle -- Ignore unavailable to you. Want to Upgrade?

To: ajtj99 who wrote (41535)	3/21/2001 8:32:18 PM
From: LTK007	Respond to of 56537

<Valuations matter, is how I think that phrase should end.> yes,that is how it should end,and given shrinking earnings these valuations become even more spotlighted. And when one looks back to historical valuations during slowing economies of the past to the still present evaluations and one comes up with numbers for the NASD and SPX and DOW that ,if they were adjusted to those valuation levels one realizes this still must get significantly worse. People who understandably look at how much we have fallen and think this must be the bottom simply haven't connected the dots to the fact this was a bubble of historic proportions(greater even than the BUBBLE of the late 20s in terms of outlandish valuations) and will inevitably resolve itself in a historic way,and those analyst that keep coming on the tube and saying "don't worry be happy all will soon be well and suggest one buy now" are whistling in the dark or just plain desperate hucksters. As for all that money on the sidelines that everybody stuck in the market is counting on to get them out of this mess,i view much of that money as the smart money that recognized the Bubble and 'wealthed-out' of the market and is in no rush to come back in--we threadsters aren't the only ones waiting for the capitulation,imo---there be a lot of money out there saying capitulate or i don't buy.max p.s.aj also said<<Warren Buffet says that if you take into account stock options, many company's earnings would be slashed by 20%. Make those special charges part of earnings instead of separate, non-recurring charges, and you get another 20%>> and that is yet another can of trouble,many companies under constant pressure to "meet or beat the street" have utilized a lot of questionable means to do this--later,gator:)

To: ajtj99 who wrote (41535)	3/21/2001 8:41:30 PM
From: LTK007	Respond to of 56537

from a VERY recent WSJ article,and see how they view present valuatons<<Behind the market's continuing fall is a sobering fact:. Stock valuations, based on depressed corporate earnings, remain at historically high levels despite the recent precipitous drops. Moreover, there are growing worries that corporate sales and earnings won't recover any time soon because the economy is in the doldrums at best and some worry about a recession. Analysts now expect companies in the S&P 500 to see their earnings grow by 2.7% this year, according to First Call/Thomson Financial. At the beginning of the year, the expectation was for 9% growth for the S&P 500 and in October the prediction was 14.8%. These concerns have whipsawed the market in recent days, tripping up even many professional investors who mistakenly thought that the worst was over. "I'm sick to my stomach. I lost a fortune. I thought we were putting in a bottom," says Seth Tobias, who runs the New York-based Circle T hedge fund. "I have stocks that were down 15% to 20% on Friday and now people are telling me they are expensive." It's all a bloody end to a historic bull market for stocks that began at the end of 1987, out of the wreckage of that year's October crash. In the subsequent 13 years and three months the S&P 500 has climbed a heady 585% before peaking a year ago. Bears argue that stocks aren't yet bargains, by almost any barometer. While the price-earnings multiple -- or stock prices as a ratio of the trailing 12 months earnings -- of the Nasdaq has fallen to 154 from 400 a year ago, according to Birinyi Associates, that's still well above the average of 52 since 1985. Nasdaq stocks would have to drop almost three-fold just to get back to their average for the past 15 years. Usually, falling stock prices mean stocks are better bargains. But earnings are falling at an even a faster clip than prices lately, so price-earnings have actually been going up. A week ago, the price-earnings multiple of the Nasdaq was 121, according to Birinyi Associates Inc. in Westport, Conn., below the current 154 figure, meaning that investors are paying more for a dollar of earnings than just a week ago. Even if money-losing stocks are taken out of the Nasdaq calculation, the price-earnings ratio is 35, a historically high level. In fact, a look at past bear markets underscores how expensive stocks remain. The Nasdaq traded at a price-earnings multiple of just 19 in late 1988, when the most recent Nasdaq bear market ended. The price-earnings ratio of the Standard & Poor's 500 is now 24. By comparison, at the end of the S&P's last bear market, in 1987, the price-earnings ratio was 12. In late 1990, when the S&P dipped 19.97% at one point, barely missing the bear market cutoff of 20%, the price-earnings ratio was 14. And stock prices were just seven times their earnings at the end of the two-year bear market that ended December 1974. Another measure of how expensive