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Strategies & Market Trends : P&S and STO Death Blow's -- Ignore unavailable to you. Want to Upgrade?

To: Justa Werkenstiff who wrote (13295)	11/2/2002 12:51:08 PM
From: LTK007	Respond to of 30712

from decision point site <<THE REAL P/E RATIO The "as reported" P/E for the S&P 500 (a.k.a. earnings based on GAAP -- Generally Accepted Accounting Principals) is the historical standard for reporting earnings. The normal range for GAAP P/E ratio is between 10 (undervalued) to 20 (overvalued). The investment sales industry would like us to think that "pro forma" or "operating earnings" is the same as GAAP, but operating earnings are a fabrication prone to gross distortion. There is no standard by which operating earnings can be judged because operating earnings are not based on real accounting -- all revenue is included, but selective expenses are ignored. This version is becoming known as EBBS (Earnings Before Bad Stuff). Standard & Poors has introduced a third version called "core" earnings, which is more critical and analytical than the other two, and is designed to reveal the true condition of the company. Our opinion is that GAAP earnings must be used for historical comparisons, and core earnings should be used for individual company value analysis. Pro forma earnings should be relegated to the manure pile. As of 10/31/02 Standard & Poors reported the following earnings for the S&P 500: "As Reported" (GAAP) EPS is $24.74; P/E is 35.80. "Core" EPS is $18.48;P/E is 41.59. "Pro Forma" EPS is $18.48 P/E is 21.30.>> decisionpoint.com My comment. The Street is still pounding the drum based on Pro Forma earnings. Until we have a law they states they can't do this they will keep trying to ram home the big lies. And there will remain also far too many investors that will play along with it as they themselves want a "fantasy market". You will still hear analyst freely saying that with SPX at 21 trailing , the market is a buy, i recommend that you buy stocks now. Are these analyst that stupid or is a premeditated scamming(protected by a non-existence of law to stop them). The answer--- they obviously know the real facts, so yes whenever you hear an analyst giving SPX P/E onthe pro-forma level know he is working with devious data to keep the lie alive. Not only the lie in terms of present earnings but the bold faced lie of future earnings. They have ratcheted their growth for 4th quarter down from about 20% to 1.5% for 2002.(and have you heard CNBS or such other talking heads venue announcing how preposterous the estimates were at the beginning of the year and saying this is just another example that our revered guests on these shows are in fact either incompetent or criminals) This happens every year. But immediately cover by saying the growth for 2003 we estimate to be 52 dollars a share, so based on that stocks are a bargain now. The 52 dollars projection is a a premeditated lie in my cold evaluation of these analysts. Who are first and foremost, salesmen on the hustle. Back before the great bull market all this crap was not going on. They were not an massive number of funds, nor nearly as many people involved in trading, and families invested in the market was only 20%. And that is only 20years ago. Also trading volume was fractional to what it is now, derivatives were not rampantly in play and options trading was much lesser. We never in history have had so many people trying live off THE GAME. For this reason i feel the the last leg down could well be a jolting up down process, like a seismogragh tape readings before a massive earthquake. I contend, if we had let this just go quickly to bottom we would be in recovery now. Why, because by prolonging it people, via cost averaging are increasingly building up their loss in capital potential. Such by keeping the JQP in the game market is working hard to put JQP in a barrel. I repeat Sir John Templeton's ominous statement " This is the most dangerous market he has ever witnessed, and at no time would he want to avoid equities more than at this time. He gave a target for the DOW of possibly 4500. Max