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Strategies & Market Trends : Stock Attack II - A Complete Analysis -- Ignore unavailable to you. Want to Upgrade?

To: waverider who wrote (24372)	11/17/2001 10:04:17 PM
From: Chris	Read Replies (1) \| Respond to of 52237

my response to the pe issue: i dont care. one makes money on from price bought - price sold. ie: PRICE MATTERS. thus TA is only tool imo. 2 conditions: i do check news because it can affect price i also check when earnings are due, i dont want any earning surprises. for longer term trades, i use weekly signals/scale keep it simple (KISS)

To: waverider who wrote (24372)	11/17/2001 10:32:34 PM
From: Lee Lichterman III	Read Replies (3) \| Respond to of 52237

Of course anything is possible. What Larry offered as you pointed out is true in a cyclical market. HOWEVER, past bottoms have had lower PEs by far than where we are now even when that approach worked. I bought AMAT and KLIC etc in 97 at PE 15 not 40 and that was a cycle low. The PE later fell to 5 once the earnings turned around and then the stock price jumped to the "normal" inflated level of the late 90s. For the buy the high PE and sell the low, you must be trading a cyclical market that is fairly predictable or at least have a "reasonable" expectation for growth ahead to get the earnings side more in line with the valuation of the price. According to YHOO, EMC has a PE of 293. Now is there going to be a server shortage next year that will propel EMCs sales up 200% next year? Other than GM giving away cars for zero percent interest and willing to get paid in inflated dollars over the next few years, there have been no reports that show any kind of recovery has started yet. Most tech releases up to now have shown Decreases of 50-95% in earings from the dismal results of last year that we thought they were going to beat easily. Heck I pulled in my horns somewhat for fear the press was going to hype how DELL and others had doubled income over last year since the targets were so low. Instead they lost more than last year. Now we are trying to hype that many companies LOST less oney than we expected. Didn't the internets try this a couple years ago? Yeah, they went up for a long time before the disappeared too. Heck I won't argue we could go up to DOW 10200,, NASDAQ 2200, etc. But I feel we will revisit the lows again too after that. We are in the wave 4 counter trend rally that has occured in all previous bear markets. There were plenty of rallies of 50% between 20 and the 40s. In the long run though, it all comes down to what is expected growth vs PE. What is the future demand going to be for these companies? I don't know and I feel that the street doesn't know either. I do feel, and I could be wrong, that I see no fuel to increase consumption ahead to anywhere near these expectations. Even the S&P is only expecting about 2% growth in 2003. Most analysts are expecting the same and that is the rosy picture outlook with nothing to even back that up. Current PE ratios are pricing in more like a 50% growth rate. Where is the beef for this forecasted valuation? No one is claiming this kind of forecast yet prices are! I have a habit of playing devil's advocate and thus I take the other side of things. That is why I tend to post more bearish in rises than in declines. On the bullish side though, I actually disagree with the earlier post about people giving up broadband. I am finally getting mine installed in a couple weeks. I would eat beans every day before I gave it up. Maybe I spend more time on line and download larger files than most people though. Still, I have always been bullish on cable companies and DSL providers feeling that the SURVIVORS of the buildout will be the new Ma Bells for the future with stable predictable earnings and likely dividend payouts. Of course some will spend too much, go into too much debt and fall off the face of the planet first. Yes, CSCO will survive and grow as will MSFT, DELL etc. Still will they ever sell as many routers , Software and PCs as the tech birth of the 80s and 90s? I seriously doubt it. Those were the good days, those were the times to get in those issues, growth was fast and furious, there was real demand and huge margins on sales. Now we are in the 2000s and demand is back to a more normal level if we pull out of the recession. Margins are gone as these items have become commodities. More fiber than can be used is already in the ground. Telecom debt is huge. Where is the growth that current PEs are forecasting going to come from? Heck I have bought more memory in the last month than I have in the last 3 years but has that helped MU? I am paying less than it costs them to make it plus they give me free second day delivery. Where is the profit? I am running a gig of memory on all my computers now and do you really think I will need to upgrade if prices ever rebound in the next couple years. I just don't see an application that will make me need to upgrade at higher prices anytime soon. Don't you think corporate IT managers are doing the same? Yes interest rates are low but they have been lower as I showed on our site. Oil is showing demand is not likely to bounce as hard as stock prices in other issues is predicting. Maybe it is just the end of price controls by cartels so lets look at the CRB instead. Nope, industrial metals and other factory indicators are also showing no likely bounce. Unemployment is not overly high though it is at the high end of the scale, but it's rate of change is huge! To summerize, yes, buying high PE near cyclical bottoms works. But to assume this is one of those times across the BROAD market, one has to assume...... The unemployment rate will stop it's huge rate of increase and reverse whiplash style to stem consumers slowing their spending. Recent news is still showing new layoffs, not hirings. That there will be a new tech revolution that will match or surpass the boom of the 80s and 90s. Note that valuations were lower then than now and that was the good times. The Bond traders are wrong though they are known to be the smartest bunch n trading. That the CRB guys are wrong and they are smart too. And last that the commercial COTs are wrong since they are no longer covering their positions and are adding to shorts again. Signs? CEOs aren't buying their own stock, so why should we believe it is under valued. They know more than we do what their outlooks are. Stocks are being diluted in a huge degree but new bond offerings thus future returns are not improving, they are getting worse. Recall that we aren't supposed to be trading pokemon cards here. Stocks are meant to be a future return bet based on profits. If they are all going to bonds, what do we get? And if money is indeed just parking in the market waiting to be spent, didn't Japan try that and we can see what great results they had. -g- Good Luck, Lee