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Pastimes : The Naked Truth - Big Kahuna a Myth -- Ignore unavailable to you. Want to Upgrade?

To: Ilaine who wrote (11956)	11/30/1998 1:39:00 PM
From: accountclosed	Read Replies (2) \| Respond to of 86076

Coby. Do you want me to respond? You toss out so many themes and vary between asking for help but then not liking it when it is offered. I have a little bit of a tough time knowing what to say. I will dissect this one, but understand that 1. they are my answers and not everyone on this or any thread will agree with all of them and 2. I am trying to be helpful, not disagreeable. 1. why short Cisco NOW? To me most people on this and the Ask Michael Burke threads are fundamentalists not technicians. I will get ahead of myself and describe some of the differences between the two. Technicians look at the history of the stock price and volume and believe that "all information is already in the market". They look for trends in their charts and compare them to historical charts of stocks that seem to have behaved similarly. In other words they pattern match the chart to earlier charts. So later when you say "I thought that knowing a stock's trading range was part of fundamental analysis?" , I would react that knowing where a stock has been is closer to technical analysis than fundamental analysis. In a sense it is just common sense. You can see how the market valued something at one point, and for many more stable stocks (read that not "internuts") there is some information contained there. But true fundamental analysis looks at the facts and circumstances of the company itself and its prospects. Sales, margin, growth, strength of balance sheet, new contracts, management, union difficulties, etc. etc. Facts about the business, its health and prospects. Then a fundamentalist has a model of what that snapshot is worth. As in I will pay a certain multiple of earnings, factoring in extraordinary growth. Looking back at the stock price history is secondary at best. To me, and perhaps not to Joseph G. or Mythman, the comment means look at the ridiculous p/e ratio. 85 is just unheard of. For those of us who have invested for more than a few years, p/e ratios are more normal closer to 12 or so. No rule like this is absolute and some markets award lower p/e's such as when recession is on the horizon and some award higher higher p/e's such as when a recession has run its course and stronger business conditions are on the horizon. Another traditional valuation model is that such market type p/e ratios get tossed out for "growth" companies. Companies with sustainable growth prospects are traditionally thought to be worthy of being awarded their growth rate as a p/e. Csco has been growing at 30% per year, which some would argue is not sustainable. So the 85 p/e is like 3 times this traditional model. I think what you see on this thread is individuals that keep such models in mind and are incredulous what this bubble has created. Wall Street has trained baby boomers and now gen x'ers to invest for their retirement, to buy the dips, to buy quality companies, etc. Such advice is somewhat reasonable in normal times. But the marketing effort has been so successful and they keep tossing out the same stuff. What was sensible at dow 3000 is bs at dow 9300. If the Dow were say 300,000 do you see that "Buy quality companies" might be a little overdone? Anyway all of us are trying to outstare the Abby Joseph Cohen's of this world. How long will their spell over the public hold sway. Stocks are beyond reasonable value, but people are still buying. Do the folks on these threads know when to short CSCO? No I don't think they do. MythMan for example knows that the market is like double where it should be, but he is snakebitten. Market timing and psychology of markets are not in the first tier of fundamental analysis. You do see MB saying he is waiting for the Christmas lies to be told. That is somewhat common sense rather than fundamental analysis. But everyone is guessing. Investing is an Art and not a pure Science. Remember that I said to you that it is about principle. I didn't mean cutting off one's nose to spite one's face. Going long or short in the end is about what do your principles of investing tell you to do. It takes a model, study, research, but in the end you find yourself. What do you have the courage, the stomach, the commitment to do. Can you handle the heat if the position goes against you. The Psychology of Shorting stocks is different for each person. Some don't do it. MB recommends that no one do it. I have only done it once. The preferred alternative is to buy puts. 2. "Coincidentally CSCO is down 2 1/2 today" I don't find too convincing. Tech stocks were down 2% on average at the time you wrote this. 3. If I haven't been clear enough, I want to state again that something about certain stocks not trading at the level they hit in July, and you called that technical analysis. I thought that knowing a stock's trading range was part of fundamental analysis? would certainly not be the first sentence or two in a fundamental analysis of a company. What business are they in? What part of the cycle is the industry in? Who are their competitors? Who is the CEO? How fast is the business growing? etc. While it may be part of an analysis that was primarily fundamental, it would be relegated to the back page of the report. I hope this was helpful.

To: Ilaine who wrote (11956)	11/30/1998 1:45:00 PM
From: Joseph G.	Read Replies (3) \| Respond to of 86076

<<Joseph G. was suggesting to MythMan that he short Cisco,>> OUTRIGHT LIE! (as can be expected from a lawyer) never told him to do anything in the market OTOH, shorting makes sense, as all suckers who don't know anything neither about Co, nor about the stock have been brainwashed to think "great Co, great stock".

To: Ilaine who wrote (11956)	12/2/1998 2:16:00 PM
From: Thomas M.	Respond to of 86076

One can be bearish on CSCO because the PE is very high relative to its growth rate. In the past, CSCO had much better growth and a lower PE. Further, one can make the case that the earnings are inflated by hiding operating costs in the frequent "one time" charges associated with the myriad acquisitions CSCO makes. Plus, the EPS may not grow as fast as expected because much of CSCO's biz is to financials, who are coming on hard times. Also, a serious recession would kill IT spending. Personally, I don't know. I think the networkers are in better shape than the PC sector. ASND is better positioned than CSCO, but a recession will kill ASND, as well. Tom