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To: Defrocked who wrote (7553)	10/4/1998 1:27:00 AM
From: Moominoid	Respond to of 86076

That leaves growth prospects for Q4'98 to Q4'99 at just 50/50 and no justification for current market P/E's. Am I too bearish?? Even at 5% or so nominal growth in earnings I come up with something like a P/E=15 or so assuming free-cash-flow is equal to earnings and the equity premium is something like 6.5%. I don't know how realistic these assumptions are. I need about a perpetual 7.5% nominal growth to get a P/E of 23. How could your post be off-topic? David

To: Defrocked who wrote (7553)	10/4/1998 2:57:00 AM
From: kahunabear	Respond to of 86076

DF, 40%, huh ? I was there a couple of months ago, but am now up to 75% or so. If you are dreaming about it, stockholders are losing $, earnings are falling, and companies are beginning to tighten their belts, it seems pretty inevitable at this point to me. Domino effect, self fulfilling prophecy, whatever ? WS

To: Defrocked who wrote (7553)	10/4/1998 10:17:00 AM
From: Joseph G.	Respond to of 86076

An interesting point of view (from PEI) << Whenever panic strikes, immediately governments spring into action. They will inevitably seek more regulation than less, more power and control whenever possible and seek to lay the blame upon external forces other than themselves. We must step back and deal with reality. This entire mess was set in motion back in 1985 with the formation of the G5. The aftermath of the Reagan tax cuts changed the dynamics of the US economy. No major foreign manufacturer could be found in the United States BEFORE the Reagan tax cuts. Afterwards, a 33% US corporate tax rate compared to 60-70% in Japan and Europe, provided the incentive for business to move directly into the domestic US economy. That shift in global capital flows in early 1980s caused the dollar to rise dramatically going into 1985. Because of trade, James Baker, then current Secretary of the Treasury organized the G5 at the time. The G5 was formed in September 1985 and boldly began a program of attempting to manipulate the world economy by vocally stating that they wanted to see a 40% decline in the US dollar. They scared the marketplace and the traders followed their direction. By 1987, the 40% depreciation in the dollar was accomplished. The problem was simple. The G5 was looking at manipulating currency values for the sake of trade. They never considered what might happen when capital investment lost 40% on their US bonds and shares. This mistake set in motion the 1987 Crash. Capital was forced out of the US and then concentrated within Japan leading to a bubble top in their economy by the end of 1989. When Japan peaked, crashed and burned, capital began to look around the world for value. They immediately focused upon Southeast Asia, China and Russia. 1989 marked not merely the peak in Japan, but also the changes in China and the fall of communism in Russia. With these events, emerging markets began. An expectation that vast sums of money could be made if you were the first to get into these areas was appealing. The IMF encourages such investments and loved the chance to find some way of becoming useful. The first crack came 4 years later in Mexico. The IMF bailout appeared to have worked, when in fact Mexico only repackaged its debt and sold it into the Euro market taking those funds and paying off the US Treasury. In reality, the debt was never paid, it was merely redistributed. Nonetheless, the details were never fully aired and Clinton was eager to take the credit for the Mexican bailout so no one bothered to ask the hard questions about how Mexico could pay off billions in such a short period of time. The Mexican bailout created the FALSE image that the IMF was this new agency that could solve the problems of the world. Meanwhile, capital shifts from South East Asia were underway and the new focus became Russia. Nearly 50% of all new money raised by mutual funds prior to 1994 had been for emerging markets and now Russian stories of untold wealth acted like a bug light on a hot summer night. Capital, looking for high yields, was far too eager to believe in the ability of the IMF. When capital continued to migrate from Asia toward Russia, the first crack appeared in Thailand during late 1997. While the IMF rallied to the moment, it sought to impose old ideas from a fixed exchange rate world into a new modern age of floating exchange rates. It insisted that nations hold their currencies at all costs and they did. The reserves of all nations right up to Korea vanished under the ill-fated philosophies of the IMF. The drain was far too great and the demands for capital funding by the IMF rose exponentially. They poured billions down the drain into both Asia and Russia and to this day have NOTHING to show for it other than sheer chaos and rising social unrest. The G7 meeting this weekend will bring to many a final flicker of hope. Hope that their shares will once again rise to new highs if someone puts the global problems to rest. We may see the silent capitulation of the IMF and its subjugation to the G7 itself as a reporting body. We will hear calls for boosting up the IMF and the leaders of the G7 will hope that the world will once again believe in this fallen angel of mercy. We may even hear grand new proposals for restructuring the world monetary system and there will be some closet aspirations that even suggest a one-world currency, but not publicly as yet. All these announcements are possible along with the IMF "liquefying" its own assets, which is a code word for selling off its gold reserves. In the end, any rally will still be merely a relief, but we cannot hope for the impossible.>>

To: Defrocked who wrote (7553)	10/4/1998 10:19:00 AM
From: Tommaso	Read Replies (1) \| Respond to of 86076

Hard to see why you call your very interesting post "off-topic." When John Templeton began investing in Japan, stocks of companies like Hitachi were trading at P/Es of 3 to 6. With the Nikkei at 13,000, down what is it? close to 70%? P/Es are still higher than US companies, though sometimes one is told that the Japanese figure these things differently. If Japan could return to great profitability, perhaps current stock prices would be justified, but until that happens they cannot be justified at present levels, low as they seem in comparison to ten years ago. A Nikkei of 7,000 is not unthinkable. Nor is a Dow of 3,500.

To: Defrocked who wrote (7553)	10/4/1998 11:12:00 AM
From: Joseph G.	Respond to of 86076

Well, I think no one can really know what are the chances, as they will depend on decisions not yet made by "the leaders", and the recent history is not that encouraging. OTOH, IMO the chances that there will be at least one Q of negative US real GDP growth is near 100%, and we already have a negative Y/Y SP500 earnings growth. And a positive 2.5% would be just equal to current CPI inflation, which has been adjusted down near 1%. As you know GDP numbers are usually real, after inflation, but earnings numbers are not adjusted for inflation.

To: Defrocked who wrote (7553)	10/4/1998 2:42:00 PM
From: posthumousone	Read Replies (3) \| Respond to of 86076

ramblings from a lurker----- at work when we do the weekly lotto office pool it has been decided that confronted with the two choices (all CASH up front, or spread out over 20years) that its SO obvious to take it now....why? "i can put it in the market and today and get guaranteed 20% returns" my 15 or so co-workers are all very small time investors...but sort of points out what glimpsing at a newspaper now and then can be dangerous thing" i'm not saying that is the wrong choice to make, but that the underlying logic isn't sound BTW. what would you choose? guaranteed payments over 20 years period of time regardless of market conditions or everything (reduced of course compared to total over 20 years) now?