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Technology Stocks : Applied Materials No-Politics Thread (AMAT) -- Ignore unavailable to you. Want to Upgrade?

To: Proud_Infidel who wrote (2793)	8/31/2002 12:38:04 PM
From: Gottfried	Read Replies (3) \| Respond to of 25522

The interview in Barron's is worthwhile because the interviewees, while bearish, are not wild-eyed bears. excerpt Barron's: We've been in a bear market for two years and you gentlemen see no signs of letup. Elaborate on that, would you? Minter, left, and Weiner: Post-bubble imbalances have yet to be corrected, they say, including low consumer savings, the trade deficit, excess capacity and high debt. Minter: We don't like being bearish, and we would love to be able to change our opinion and turn bullish on the U.S. stock market. But when we look at the historical-valuation metrics, we find it very difficult to get enthusiastic about buying common stocks. When we superimpose other historical facts on top of the overvaluation -- unprecedented participation by the public and foreigners in the stock market, for instance -- we get downright bearish. Q: Speak to the valuation. How overvalued is the Standard & Poor's 500 at this point? And what about Nasdaq? What's fair value? Weiner: The S&P 500 is still selling at 34 times trailing reported earnings and 27 times consensus earnings estimates for 2002. Historically, the S&P has traded at about 15 times earnings on average, and at the bottom of a bear market it has almost always sold at 10 to 12 times earnings. The market is still overvalued at this point, and it's vulnerable with the economy so very fragile. Q: What about Nasdaq? Minter: The Nasdaq doesn't have a price-earnings ratio because the losses by companies in the index outweigh any profits. At the peak of the market, Nasdaq sold at a multiple of 245 times earnings. Q: At what level does it become attractive to you. Here? Minter: It still doesn't look attractive. We would have to look at each individual company on the Nasdaq, because it is really hard to say an index is overvalued or undervalued when there is no P/E to that index. Q: But you are short the Nasdaq Trust shares, or the QQQs, so you must have done some valuation work on the index. Weiner: We look at a lot of the individual stocks in the index and find that they are highly overvalued. We are also coming off a burst bubble, resembling the events of the Crash of 1929 and Japan in 1989, and where there were lots of distortions and imbalances, unlike conventional economic cycles, that have yet to be corrected. Q: Where does this lead then? Are you forecasting a depression? Weiner: Either the economic recovery is going to be very anemic or we are going to slide into renewed recession. These imbalances -- the low consumer savings rate, the trade deficit, excess capacity and high debt levels -- have to be corrected. As long as they exist, they are headwinds against economic growth. There's very little capital spending, and managements are saying there won't be any increase in capital spending, particularly in information technology, on the horizon anytime soon. Consumer spending is starting to fade after being the major driver of the economy. We expect the economy to really soften again at this point.[snip] G.