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Pastimes : The Justa & Lars Honors Bob Brinker Investment Club -- Ignore unavailable to you. Want to Upgrade?

To: Wally Mastroly who wrote (3263)	2/9/1999 2:32:00 PM
From: Justa Werkenstiff	Read Replies (1) \| Respond to of 15132

Wally: The Russell is key. It lead the market down last summer and fall. If there is no basing or uptrend in the Russell 2000, the correction is not over IMO.

To: Wally Mastroly who wrote (3263)	2/9/1999 6:03:00 PM
From: Lars	Respond to of 15132

* Bloomberg Article * New York, Feb. 9 (Bloomberg) -- U.S. stocks fell on concern that 1999's early gains sent shares too high relative to their earnings prospects. Internet shares sank for the sixth time in seven days. Lycos Inc., the market's 10th-best performer since the start of the year, sparked the drop after USA Networks Inc., the media company headed by Barry Diller, agreed to buy the No. 3 Internet search directory at what one analyst called a ''minimal'' premium. ''The euphoria's gone,'' said Martin Yokosawa, a portfolio manager for Oberweis Asset Management Inc., which oversees $225 million in North Aurora, Illinois. ''We went to the party and really whooped it up, and now we have a hangover.'' The Nasdaq Composite Index slid 59.13, or 2.5 percent, to 2355.89, while the CBOE Internet Index tumbled 8.2 percent. The Dow Jones Industrial Average fell 97.23, or 1.3 percent, to 9195.65. The Standard & Poor's 500 Index dropped 17.07, or 1.4 percent, to 1226.04. Nine stocks declined for every five that rose on the New York Stock Exchange. Lycos fell 28 1/4 to 99. ''The premium to Lycos stockholders is minimal, so there's not much of an incentive to bid the stock up,'' said Dawn Simon, an analyst at Brown Brothers Harriman & Co., who has a ''neutral'' rating on Lycos. As of Friday, Lycos was up 147 percent since the start of the year, on speculation it would be taken over by General Electric Co.'s NBC network. The CBOE Internet Index has lost 18 percent since Jan. 29, although it's still up 16 percent this year. The S&P 500 is little changed for 1999. 'No Value' ''There's just no value'' in many Internet stocks, said Yokosawa. ''They've discounted the earnings five years out, and it has to be the very best scenario to have those prices be valid.'' He said his firm owns Mindspring Enterprises Inc., an Internet service provider. That stock, down 5 3/ 8 to 80 today, is still up 31 percent this year even after losing 21 percent in the last seven sessions. USA Networks rose 4 1/8 to 42 1/16. Yahoo! Inc. fell 16 3/8 to 143 and Amazon.com Inc. fell 7 to 102 1/8. Larger companies that gained in recent weeks because of their exposure to the Internet also declined. AT&T Corp. dropped 3 1/16 to 87 15/16. Cisco Systems Inc., a maker of networking equipment, fell 3 7/8 to 98 1/16. The market isn't likely to go much higher in the short term because the flood of new cash from investors at the start of the year is slowing, and some investors are thinking about selling stocks to pay capital gains taxes, Yokosawa said. Also, the prospect of rising interest rates is weighing on the market. The yield on the 30-year U.S. Treasury was 5.31 percent today, up from 5.08 percent at the end of January, as signs of unexpectedly fast growth scotched expectations for lower interest rates. Higher interest rates make it more expensive for companies to borrow money to expand their businesses. 'Not Healthy' Yesterday, the Russell 2000 Index of small stocks fell below its 200-day moving average, signaling to some analysts that gains in the S&P 500 and Nasdaq are based on too few stocks for the rally to be maintained. The concentration of big gains in Internet and big computer stocks ''is not healthy,'' said William Meehan, chief market analyst at Cantor Fitzgerald, an institutional brokerage. The Russell 2000 slipped 0.9 percent today. ''The whole market is in a corrective phase,'' said Charles Blood, a market strategist at Brown Brothers Harriman. He said the S&P 500 could decline another 3 percent before it rallies again. He said it was a bad sign that the broader market didn't rally after the index reached a record Jan. 29. The Wilshire 5000 Index, which includes all U.S.-based companies, is little changed for the year, up 0.7 percent. Blood cut his near-term rating on stocks from bullish to neutral last Friday, although he retained his year-end target of 11,000 for the Dow and 1400 for the S&P 500.

To: Wally Mastroly who wrote (3263)	2/9/1999 6:09:00 PM
From: Lars	Read Replies (1) \| Respond to of 15132

* Financial Times Article * ANALYSIS: Is it all really necessary? By Philip Coggan Is your effort really necessary? Analysts and investors spend countless hours poring over corporate earnings estimates but the evidence suggests that they are missing the point. A rise or fall in an equity market has two components - a change in the earnings of the corporate sector and a change in the multiple that investors are prepared to pay for such earnings. It is the change in the multiple that seems to have driven the long bull market. In 1981, just before the start of the US bull market, the S&P 500 companies had implied earnings of $15.22. In 1998, IBES International, the information company, estimates that S&P earnings were $44.29. In other words, earnings have nearly tripled over the long bull period. Not bad, but that equates to a compound growth rate of just 6.5 per cent. Had the market kept pace with that earnings growth, investors would have had a decent, but not terrific, time. As it is, the S&P 500 rose more than 900 per cent between the start of 1982 and the end of 1998 because the price-earnings ratio shot up from 8 to around 28.5, based on end-1998 earnings. Had the rating not altered, the S&P 500 index would only be 354.3. Other markets also show a divergence between earnings growth and market movements. In Japan, hard though it is to believe, Datastream figures show that corporate earnings have fallen over the 17-year period. The doubling in the market over the period is entirely due to an increase in the rating. In the UK, earnings growth has played a much more important role. The overall market has risen 842 per cent since the start of 1982, which can be roughly broken down into an 80 per cent increase of the market multiple and a quintupling of corporate earnings. Finally, in Germany, there has been a fairly balanced result, with the market gaining 630 per cent on the back of a doubling in the rating and a tripling in corporate earnings. Wall Street, to nobody's surprise, has offered the greatest capital growth - in local currency terms - over the period. But if the markets had been judged in earnings growth terms, the ranking would have been: the UK, Germany, the US and Japan. That order might surprise both the champions of US industry and the denigrators of the UK corporate sector. There is no difficulty in explaining the increase in ratings. Bond yields and short term interest rates have tumbled since the early 1980s, reducing the attractions of alternative asset classes and the discount rate that investors apply to future earnings growth. History should sound a few alarm bells, however. A similar exercise was undertaken at the end of 1989 by GMO Woolley, the fund management firm. GMO found that the outperformance of the Japanese market over the previous 20 years was almost entirely due to a re-rating, rather than to any fundamental earnings outperformance. And we all know what happened to the Japanese market in the 1990s. One does not have to postulate a repeat of Tokyo's downfall to make the maths look difficult for Wall Street. The S&P 500 index has risen by a compound annual rate of 14.5 per cent over the 1982-98 period, allowing US investors to become accustomed to very handsome annual returns. Alas, the implication is that, over the next 17 years, if US corporate earnings grow at the same rate, the market multiple will have to treble again (to around 85) for investors to enjoy the same returns. Put another way, if the multiple dropped back to the 1982-98 average of 17 by 2016, the compound annual rise in the S&P would slow to just 3.5 per cent. And even that assumes that US corporate earnings, which have been boosted in the 1982-98 period by falling interest rates and commodity prices, can maintain their growth. There is also an economic implication. The latest Barclays Capital Equity-Gilt study focuses on the apparent discrepancy between the very low (on some measures, negative) US savings rate and demographics, which shows a steady rise in the proportion of the population which should be saving. The answer is that US savers feel the high annual growth rate of share prices means they need to put less aside for their retirement; there is a negative correlation between the savings rate and stock market returns. But the consequence is that, for the US economic bandwagon to keep rolling, it is not enough for Wall Street to maintain its current level: it must keep rising at its previous rate. For as soon as it does not, US citizens will suddenly have to save more and spend less - and that could mean recession.