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 : Qualcomm Incorporated (QCOM) -- Ignore unavailable to you. Want to Upgrade?

To: marginmike who wrote (106936)	10/12/2001 8:03:21 PM
From: jazzcat2000	Read Replies (1) \| Respond to of 152472

MM At first I thought you had written that whole thing and I figured you got spell check <g>eom

To: marginmike who wrote (106936)	10/12/2001 8:03:48 PM
From: Jon Koplik	Respond to of 152472

A joke (dedicated to Jerome Levy Economics Institute) : Jerome Levy economist : "The sky is falling !!! The sky is falling !!! " marginmike and Jon Koplik : "Sell sky !!! Sell sky !!! " Jon.

To: marginmike who wrote (106936)	10/12/2001 8:51:54 PM
From: Jordan Levitt	Respond to of 152472

Hi Mike, A few important points about the S&P multiple. First of all if look at the S&P multiple ex-technology it is at about 17. That is not as low as other bear markets when it has gotten to as low as eight times earnings as you have mentioned before. Usually though when the bear has taken hold in the past we have had much higher interest rates (in order to choke out inflation). A lower discount rate allows for higher valuations. Most importantly, looking at aggregate numbers like that can be very misleading. Due to the easy access to equity markets of the past several years, many companies have gone public who don't have any earnings. That skews the earnings multiples upward. In calculating the earnings multiple of an index they add up the total earnings less the total losses of the companies in the index and then compute the P/E multiple. If you take out the companies who are losing money in the S&P 500 (after all, you don't have to buy those companies) and look at the average P/E for the companies that actually have earnings it is around 14. Not nearly as high as the aggregate P/E would suggest. Years ago, pre-bubble, companies needed a history, and an earnings record in order to come to market. So the comparisons that are made between the index now and the index in the seventies bear or the eighties bear are somewhat misleading as the the index itself has changed dramatically. Makes you think about all those sheep who bought index funds and ETF's. As usual Joe Six Pack gets screwed again. You may well have a market of stocks (rather than a stock market) where many individual stocks rise significantly yet the averages go nowhere for years. BTW, this is only for the S&P and the Nasdaq, the DOW is its very own basket case. High P/E's, low growth, bad combo. Have a great weekend Mike. Time to go drink a nice cold Canadian beer ! Cheers !

To: marginmike who wrote (106936)	10/12/2001 8:57:11 PM
From: The Verve	Read Replies (1) \| Respond to of 152472

It's not an authentic MM post UNLESS it has one mispelling and a chickenscratch -g intertwined in it. Another mark of a genuine MM post is an occassional gfy thrown in, for good measure, to keep people honest. Lord knows there are a lot of people on these boards that need to be kept honest. <g> Verve

To: marginmike who wrote (106936)	10/12/2001 9:14:51 PM
From: cfoe	Respond to of 152472

Valuable post. Thanks. RE: S&P multiple do you know of any comparable study based on cash flow vs. accounting profits?

To: marginmike who wrote (106936)	10/13/2001 10:03:08 AM
From: Robin Plunder	Read Replies (2) \| Respond to of 152472

I think MarginMike makes some good points, such as the issue that the high multiples we have enjoyed in the recent past were based on an outlook for high growth, and that if the high growth fails to occur for a couple of years, then the high multiples will contract. As he also notes, one counter-balance to this effect would be if interest rates were to remain very low for an extended period of time, since lower interest rates can justify a higher PE. It is difficult to choose how to invest in this environment, when some signals look positive, and yet there are also some very serious negative elements. Although, perhaps this is just a new manifestation of the 'wall of worry' that Bull markets need in order to exist. My approach is to remain invested in QCOM, since they have a good prospect to grow at a high rate over a long period of time, and the PE probably will fluctuate, but the growth trend will allow it to generally rise even in a difficult environment. I don't think one can say this about many of the other tech stocks, such as sunw, jdsu, emc, ntap, lu, nt, csco, intc, dell. Their growth prospects may improve, but there certainly isn't much visibility on that growth, and it may be that when growth does return, these companies may not be well positioned to participate, either due to technology shifts or continuing weakness in their area of expertise. Robin