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Strategies & Market Trends : Ask DrBob -- Ignore unavailable to you. Want to Upgrade?

To: Dr. B. ® who wrote (41925)	8/5/2001 5:49:41 PM
From: jpdunwell	Respond to of 100058

Hi dr_b, sorry to hear about your wife. My sister gets migraines too, can't recall the medication she takes. Must run in the family, as Mom used to get them too. I only get the small nagging type. Anyway, hope your wife recovers soon, as pregnancy by itself is enough hardship. And Congratulations to you both! About the market... With your timeframe, as you pointed out, this bear market is a godsend. But, if you really believe in a long-term bear, you're much better off making a priority of paying down debt (mortgage, etc) over investments. Your plan sounds very similar to the university plan where I used to work. Initially, we had to go with the state defined plan as well, but later were given an option to self-manage with matching dollars. Unfortunately, we still had to pay Social Security (that's a neat trick your university pulled, didn't know it was possible to avoid that). The worse thing about our state plan was, if you left before you had 30 years of service in, you were given your principal back plus a whopping 4% interest compounded annually. Not a very flexible plan, and hence the change. On EMC, maybe you're right about the price, but I sure don't think of it as cheap by any means. Depending on which earnings you use, its P/E is around 60 or 70. I don't know of any large company that's been able to sustain that kind of P/E outside the bubble era. I won't even get into all the games these companies have been playing with their earnings to make them look better than they are (including one-time gains, but excluding write-offs, expansion costs, etc.). Sure, it's a great company with good market share, but the kind of profits needed to justify that valuation won't be easy to come by. Competition has a way of seeking out profitable areas, and making them less profitable. Just look at what NTAP and EMC are doing to their profits right now in attempts to fight the price wars and take market share (Sun, Dell, others also entering this area now). Monopoly companies (MSFT, INTC) are of course an exception to that, but even they don't sustain that kind of valuation, and I don't see EMC in that light. When I factor in earnings prospects and the economy, it seems to me that it has a much better shot at getting halved from here than doubling. Then again, in this crazy market, I could be wrong. Not trying to be argumentative, but would love to hear reasons that would turn me bullish. JP