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Technology Stocks : Cisco Systems, Inc. (CSCO) -- Ignore unavailable to you. Want to Upgrade?

To: RetiredNow who wrote (74593)	11/13/2007 8:25:34 PM
From: RetiredNow	Read Replies (1) \| Respond to of 77400

Rosy forecast for S&P500 for all you worry warts out there. Not quite the doom and gloom that the media will want you to hear. For those of you non-conformists that keep to their tried and true dollar cost averaging in every pay check and diversified, long term approach, you have every reason to believe this recent market volatility will play in your favor. Check this article out: We See a 14% Return in the S&P 500's Future Why we think the SPDR is poised to rip off a double-digit gain. http://news.morningstar.com/articlenet/article.aspx?id=212946&pgid=hparticle By Jeffrey Ptak, CFA, CPA \| 11-12-07 \| Let's cut right to the chase: Our research suggests that SPDRs Trust , an ETF that tracks the S&P 500 Index, will return 14% annualized over the next three years. Lest you wonder which hat we pulled that number out of, rest assured that there were no wands or seers involved. And because top-down macro forecasting isn't our bag (what…you were expecting the second coming of Bill Gross?), we kept the focus squarely on the stocks in front of us. As it turns out, that's a lot of stocks--we cover 2,000 companies, including more than 450 of the S&P 500's constituent holdings. Therefore, we can harness the work that our analysts do in evaluating company fundamentals, such as the presence and durability of competitive advantages each business might boast. That work culminates in a fair value estimate that our analysts place on each stock they cover. We can roll up the fair value estimates that our analysts have placed on the S&P 500's holdings and, voilà!, come up with a fair value estimate for the index as a whole (1,626.80 as of Nov. 7). But how does that get us to an expected return? We ordinarily expect a stock's price to converge to fair value over a three-year time horizon. Assuming that we compound our fair value estimate at the cost of equity--which is the minimum compensation that we demand for owning a stock--the expected return represents the return that will cause the stock's price to converge to fair value at some point in the future, not to exceed three years. This same math holds for an index like the S&P 500, provided we have adequate coverage of its underlying assets (the 450 S&P 500 stocks that we cover account for 99.5% of the index's assets). Consider then that the S&P 500 was trading at a 9% discount to our fair value estimate as of Nov. 7 and that our weighted-average cost of equity for the index stands at roughly 10.2%. When you take the two together, it translates to a 13.8% expected return for the S&P 500. Subtract the SPDR's infinitesimal 0.09% expense ratio from that tally, and you end up with a 13.7% return. Of course, a cushy return does not a screaming buy make. Otherwise, we'd throw caution to the wind and buy nothing but very risky stocks such as biotechs. That's why we have to consider SPDR's return in relation to its risk. The verdict? We'd recommend the fund at these levels, as investors stand to reap a hefty 3.5% excess return (the difference between SPDR's 13.7% expected return and its 10.2% cost of equity). Put differently, investors can buy a security that's less than half as volatile as our typical below-average-risk stock at 91 cents on the dollar. We'd take that trade.

To: RetiredNow who wrote (74593)	11/13/2007 11:39:10 PM
From: Elroy	Read Replies (1) \| Respond to of 77400

Once again you are incorrect. When Cisco stock was at $28 or $29, I said the risk of Cisco stock going lower was close to nil. You said that I was factually in error, which is a ridiculous statement, as I was chatting about an opinion of mine based on everything I know, not based on an in depth statistical analysis. Man, it appears logic has abandoned you. Regardless of your opinion on the matter, the risk of CSCO stock going lower at that time was not "close to nil", so you were factually incorrect. That means I was right, and you were wrong. How you conclude the opposite is perplexing. However, since then the stock has moved up to $30. So we're still in anecdotal land here, but at least the anecdotal evidence is supporting my earlier claim that there was very low risk of it going down further. Again, logic has abandoned you. That A happened does not prove that there was a very low risk of B at the time. When a slot player hits the jackpot on a given pull, that does not mean that there had been a very low chance that he would miss the jackpot on that same pull. In fact, the opposite was true. CSCO's recent appreciation does not prove your claim that the downside risk to CSCO, at that time, was close to nil. In fact, it doesn't prove much of anything. You agree, right? Keep digging your own hole, Elroy. I'm always interested in watching how deep you dig it. I'm digging the hole to try to unearth you as a muddled confusion seems to have buried you way down there!