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

To: Jack Clarke who wrote (13292)	1/21/1998 3:08:00 PM
From: Don S.Boller	Read Replies (2) \| Respond to of 18056

Jack: PAYING FOUR or FIVE TIMES BOOK VALUE You are correct. But, things are a tad different than in "the old days". This market has been driven by drugs, financials, tech stocks, etc. NOT the old "bricks and morter" stocks like steels and autos. So, perhaps, book value is not as important. HOWEVER - what about Market Value (or Cap) compared to Revenues (1996 figs.) to wit = Gen'l Elec. - 242.2 (billions) vs 78.5...Coca-Cola 158.9 vs 18.5.....MSFT 157.9 vs 11.4....Exxon 152.1 vs 116.7....Merck 125.9 vs 19.8..... INTC 113.0 vs 20.3....PHillip Morris 109.0 vs 54.5.... Procter & Gamble 106.7 vs 35.8....IBM 97.2 vs 75.9.... and AT&T 96.0 vs 64.9 Worth pondering. BWDIK Don

To: Jack Clarke who wrote (13292)	1/21/1998 9:10:00 PM
From: Zeev Hed	Respond to of 18056

Jack, I think that we have pieces of data missing to make a fair comparision to past market regarding valuation vs book value. The first is the prevailing interest artes, the second the average extent of leverage in the book. Twenty years ago, IBM did not use any leverage at all on its balance sheet, thus the return on equity required jerculean efforts to achieve. Today companies might have a more balanced use of debt and equity to conduct their business, so the book of today is smaller for the same sales volume relative to yesteryear's books. I prefer to look at price to slaes ratio or price to assets ratio (but with a correcting factor for overleveraging which may endanger corporate life in "bad" time. On the price to sales ratio, there are a lot of companies that are indeed quite rich. By the way, the same argument should be used when looking at the total market valuation relative to GDP (which has often averaged under 1:1 and is now at 1.30 to 1), these numbers should be adjusted for prevailing interest rates as well, but is 1.3 too much at 5.75%, possibly, but if someone has historical ratio (normalized for "market condition?", that would be useful. Zeev