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Strategies & Market Trends : MDA - Market Direction Analysis -- Ignore unavailable to you. Want to Upgrade?

To: American Spirit who wrote (76948)	5/13/2001 8:11:35 PM
From: KyrosL	Read Replies (2) \| Respond to of 99985

I am seriously questioning your choices for your mother's portfolio. Take IBM for instance. The last 5 years have seen an explosion in technology investment, something that may not be repeated for another generation. IBM was a beneficiary of this. During this time IBM grew earnings by an average of around 11%. Surprisingly, a good portion of this earnings growth was not operating earnings, but rather investment gains on IBM's pension portfolio. It is therefore reasonable to assume that IBM's future earnings growth will be well below 11% on the average. Yet at its current price it sells at a P/E ratio of 25. I am advising my mother to avoid stocks and instead buy inflation protected treasury bonds.