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

To: joe who wrote (18089)	10/10/1998 10:29:00 PM
From: Joseph G.	Read Replies (2) \| Respond to of 77400

(i) Future earnings at a well above average for industry rates are sufficiently variable (that is, they can drop) as to create uncertainty greater than any influence of Treasury rates. That is, is the actual (not predicted) number will be +/-3%, it will make more difference to stock valuation than whatever long bond does. It is also worth noting that corporate bonds' interest rates are well above treasuries, as bond investors anticipate that corporations (which are not US Treasury) may have difficulty earning what they have to pay in interest on these bonds. (ii) You may also note that '98 was 30% over '97, and three years ago EPS grew at 100% Y/Y. It's called growth rate deceleration. One will have to put lower and lower numbers in future years. It may even become negative, as I'm sure you know lots of Corps. are reporting these days. T-bond interest payments don't go down no matter what. This earnings growth rate deceleration is very evident in the long term semi-log stock price chart. It is exactly the reason why extrapolating last eight years average stock price appreciation rate into the future is an exercise in futility. techstocks.com PS. When I bot CSCO in early Aug 1994, trailing 4 Q (not future earnings) p/e was 20. With all charges (if any) in there, NOT excluded.