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Pastimes : Ask Mohan about the Market -- Ignore unavailable to you. Want to Upgrade?

To: Cynic 2005 who wrote (9436)	11/25/1997 11:04:00 PM
From: Bonnie Bear	Respond to of 18056

Mohan: we may get a glimpse of the future by looking at DRAM prices. Apparently south Korea has started dumping DRAM into the US markets this week at substantially less than the cost to produce it. (And remember, the IMF bailout of South Korea is paid for with taxpayer money...)

To: Cynic 2005 who wrote (9436)	11/26/1997 10:55:00 PM
From: Rational	Read Replies (3) \| Respond to of 18056

Mohan: Corporate profits may increase if the demand continues to be high. What I see is a reduction in margin. Companies who can peddle high volumes will survive. Others (like MUEI) will either collapse or cut wages to stay afloat or be acquired. At the end, the set of all surviving firms will get a fair return on capital. For the strongest companies (surviving in the game), a fair return (earnings) of 5% on investment is justified (fair). This gives a P/E of 20. Whenever, the P/E is bigger [smaller] than the reciprocal of the rate of interest, the market will go down [up]. This has been happening historically. After the 1987 crash, the percentage moves have been very small because smart money investors keep watching this relationship between S&P 500 index profitability and interest rate. Sankar