Silicon Investor (SI) -- The First Internet Community

STOCKTALK

We've detected that you're using an ad content blocking browser plug-in or feature. Ads provide a critical source of revenue to the continued operation of Silicon Investor. We ask that you disable ad blocking while on Silicon Investor in the best interests of our community. If you are not using an ad blocker but are still receiving this message, make sure your browser's tracking protection is set to the 'standard' level.

Technology Stocks : Amazon.com, Inc. (AMZN) -- Ignore unavailable to you. Want to Upgrade?

To: GST who wrote (131592)	9/20/2001 3:53:49 PM
From: H James Morris	Read Replies (4) \| Respond to of 164684

Gst, about valuations. You have a disagreement with any of this? >If you look at it from a valuation standpoint, the answer can be very sobering -- although valuation is only one criterion for stock selection. Following Monday's plunge, the price/earnings ratio of the Standard & Poor's 500 was 28.02. Historically, it averages about 14.5. It gets worse. The S&P 500 is trading at more than 2.5 times median historical norms by other value measures, such as price/revenue, price/book value, price/cash flow and price/dividends, according to John P. Hussman, publisher of Maryland-based Hussman Investment Research & Insight. He believes stocks can decline as much as 40 percent from here. And you can't dismiss him: In early 2000, he was saying that the Nasdaq was likely to lose between 65 percent and 83 percent of its value. His view was considered extreme. Not now. He says that overvalued markets can go on for some time. We saw that in the 1990s. However, "One of the unfortunate things I hear is, 'Don't worry about the short term, think about the long term,' " says Hussman. "The unfortunate reality is that overvaluation implies unfavorable long-term returns." Hanging over the whole question is the low quality of corporate earnings. Accounting ledger-demain has bloated them in recent years. Recently, The Wall Street Journal figured that if earnings of the S&P 500 companies were calculated using generally accepted accounting principles (GAAP), the multiple would be 36.7. Post-Sept. 11, that's probably about 32, says Hussman. Where does that leave us? Very vulnerable. In coming days, one company after another will be giving new guidance to investors, shaving previous earnings expectations. Among the accounting abuses have been the non-expensing of stock options for employee compensation and the promiscuous use of so-called "non-recurring" charges to cover past strategic errors. Also, the booming stock market of the 1990s swelled profits by reducing the expense of defined-benefit pension plans. These three factors led to a significant overstatement of earnings in the S&P 500 during the period, according to researchers at Wall Street's Sanford C. Bernstein & Co. Conservatively adjusting profits for all three factors, Bernstein researchers figured that the earnings per share of S&P 500 companies from 1995 through this year (estimated), would have dropped from 5.1 percent a year to 1 percent a year. "It's clear that the quality of earnings in the latter half of this business cycle was poor," says Bernstein's Michael L. Goldstein. Expectations for a powerful profit recovery next year appear quite optimistic, he says.

To: GST who wrote (131592)	9/20/2001 6:40:40 PM
From: H James Morris	Respond to of 164684

There was a time, not so long ago When Abby spoke, the market would go. But Tuesday, traders mostly shrugged And the guys on CNBC, man, were they bugged. She cut her numbers and targets, too. The response on the Street was, "So what else is new?" At the height of folly, attention was paid, But nowadays she's just another that traders fade. It's a short distance to go from hero to goat But it's bad karma for old bears to sit there and gloat. For everyone everywhere will someday get burned But one thing's for certain, the worm has now turned. As for Easy Al and his merry gang's decision Cutting rates by 25 bps was met with derision. Doing what's expected and acting just like sheep Left investors disgusted and the market in a heap. The man once revered as a magical wizard Is now being viewed as just an old gizzard. As time goes by, it's become perfectly clear he hasn't a clue. He has no more sense of the future than you or I do. But shed not a tear for the man behind the curtain. He'll get an advance bigger than Bill; of this I am certain. Yes, yesterday's heroes have now all been spurned And it's obvious to all that the worm, it has turned.