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Non-Tech : QQQ - Nasdaq 100 Trust -- Ignore unavailable to you. Want to Upgrade?

To: Mannie who wrote (642)	8/14/2001 9:12:29 AM
From: OldAIMGuy	Read Replies (1) \| Respond to of 840

Hi Scott, The P/E of Value Line has been rising steadily all year. That's obviously not because Prices have been rising! :-) In fact, it's because earnings, on average, have been falling. I don't know just when the earnings trough will be found and stop declining, but it seems to me many companies are now in the mood to sweep as much dirt out as possible. I guess a quarter or two of dirt sweeping and house cleaning and they'll bottom. Elaine Garzarelli pointed out many years ago that there's a correlation between the 13 week Treasury and the broad P/E. Her "magic number" was that it should always add up to about "20." If it got much higher than that (a point or two) it was Bearish and a bit lower was bullish. My own reconstruction of data from 1982 forward puts the average at about 20.5 with Bearish above 21.5 and Bullish below 19.5. (I used Value Line's P/E and the 13 week Treasury rate) Currently it's showing ~21.6. I'll post the updated graph here later today from my office computer. Interest rates have been dropping almost as fast as the P/E has been rising, keeping it in the "Neutral" range for most of this year. This week it finally gave a bearish signal for the first time. Looks like we need another quarter point drop in interest rates to bring it back in line. Best regards, Tom