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To: Srini who wrote (3016)	1/20/1999 7:27:00 PM
From: Tunica Albuginea	Read Replies (1) \| Respond to of 41369

Srini, thanks for your insight.Thus you are saying that the largest US Fund Magellan has it all wrong to make AOL it's 3rd largest holding biz.yahoo.com Cheers, TA

To: Srini who wrote (3016)	1/20/1999 7:45:00 PM
From: Tunica Albuginea	Read Replies (2) \| Respond to of 41369

Srini thought this article to would pick your interests: It says: ””My advice is for you simply to throw down any article where someone uses this stat uncritically and unqualified because the whole article is likely to prove dangerous to your wealth. Historical P/Es alone simply have nothing much to tell us about valuations today. “” Read it here: fnews.yahoo.com Some abstracts: FOOL ON THE HILL An Investment Opinion by Louis Corrigan Market Bubble? Prove It Two years ago, Federal Reserve Board chairman Alan Greenspan as ked, "[H]ow do we know when irrational exuberance has unduly escalated asset values, which then become subject to unexpected and prolonged contractions ...?" In other words, how do we recognize a stock market bubble that, when burst, will damage not just stock prices but the real economy? ……………..Stocks valuations are rightly based on a discounting of future cash flow. High P/Es do signal high expectations for growth, but some of these expectations will be met. A classic example comes from Stocks For the Long Run, where Jeremy Siegel shows that in 1972, the so-called Nifty Fifty stocks traded for an average of 42 times earnings, more than double the P/E for the S&P 500 index at the time. Many believed the Nifty Fifty were way overvalued, and some individual stocks certainly were. Yet, Siegel argues that, as a group, their subsequent performance justified even their peak prices. Other factors play into valuations, too. Earnings are simply worth more when inflation is low and alternatives to equities, such as fixed-income investments, deliver low returns. Also, the compositions of the S&P 500 and the Dow have changed over time. These indexes now include a number of leading companies, such as Microsoft (Nasdaq:MSFT - news) , America Online (NYSE:AOL - news) , Cisco (Nasdaq:CSCO - news) , and Intel (Nasdaq:INTC - news) -- and even IBM (NYSE:IBM - news) , Disney (NYSE:DIS - news) , and Coca-Cola (NYSE:KO - news) -- that would be stunningly undervalued if priced according to current earnings and short-term growth prospects alone. ………………… ………Yet, does Greenspan think we're experiencing an economic and financial bubble? In short, no. My view is that he simply hasn't convinced himself one way or another. His speech today revealed his keen appreciation for the way that higher stock prices have fueled consumer spending and pumped up the economy. Greenspan wouldn't mind seeing stock prices hibernate a while. Still, he has said that bubbles are often only obvious in retrospect. That's partly because one cannot know until much later whether markets have discounted more growth than can ultimately be delivered. Yet, Siegel's example suggests the inverse is also true. Only years later could one say that the alleged Nifty Fifty bubble was actually an instance of the market discounting future growth almost perfectly…………………………… ……… Reporters like Cassidy who fall back on the historical P/E factoid to argue that the market is overinflated are basically screaming that they have no idea how companies are, or should be, valued. ======================================= Back later, TA