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Strategies & Market Trends : Bob Brinker: Market Savant & Radio Host -- Ignore unavailable to you. Want to Upgrade?

To: Diamond Jim who wrote (8188)	10/5/1998 3:46:00 PM
From: Skeeter Bug	Read Replies (1) \| Respond to of 42834

james, a corolla is a good car. would you pay $40k for a good car? that is the reasoning i see bulls use. yes, stocks have a value in a low interest rate environment with slow growth. no those values do not include a cce trading at 40-50 pes with less than their 6-10% eps growth now. not even half that. i don't debate carollas are good cars. i just don't believe buying them at $40k a pop makes good long term business sense. btw, japan has had growth and lower interest rates and their market is at 14 year lows. something to ponder...

To: Diamond Jim who wrote (8188)	10/5/1998 6:03:00 PM
From: Wren	Read Replies (1) \| Respond to of 42834

I have trouble with the concept that as long as earnings are growing at any pace, no matter if very slowly, that stocks will go up. I still think there is a relationship between rate of earnings growth and P/Es. Companies with above average growth rates deserve higher P/Es of course. But shouldn't stocks of companies with diminishing growth rates have diminishing P/Es also. Depending on the relationship of the earnings growth rate and the P/E, diminishing rates of earnings growth should either slow the rise of the stock, cause no growth in the stock price, or cause the stock price to decline. This is certainly the case in the high fliers. Miss the analysts estimated earnings a few cents, and the stock drops like a rocket. I believe this is true for all stocks, but not as extreme for the low fliers. A slowing rate of growth results in a slowing or dropping stock market, IMO. I believe that is a lot of what is going on now - anticipated slowing earnings growth is dropping the high flyers a lot and the low fliers and mid-level flyers also.