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Strategies & Market Trends : MDA - Market Direction Analysis -- Ignore unavailable to you. Want to Upgrade?

To: Kerry Phineas who wrote (6232)	2/12/1999 2:52:00 PM
From: Les H	Read Replies (1) \| Respond to of 99985

cbs.marketwatch.com

To: Kerry Phineas who wrote (6232)	2/14/1999 7:44:00 AM
From: Arik T.G.	Read Replies (1) \| Respond to of 99985

Hi Kerry, It's been a while. DELL IMO is standing out among NDX big caps as the one that is the easiest to see its extreme overvaluation. MSFT is a monopoly and INTC has what could pass as a reasonable P/E, CSCO is building the infrastructure of dreamland and YHOO drives on it. All those companies are very difficult to price (except INTC, which I believe will show negative earnings growth starting 1999), because of the dream factor and very high margins. DELL and AMZN have roughly the same characteristics. DELL is a boxmaker, AMZN sells books and CDs. They have gross margin in the 21% neighborhood THAT CANNOT RISE because they do their business in a competitive environment. Both showed tremendous sales growth but are beginning to be limited by the market growth (you simply cannot be a monopoly in the boxes or books business), so for both there is an upper bound to expected future growth and earnings. These two are simply the clearest cases of the extreme overvaluation in the tech sector (BTW, who's the one that started calling a boxmaker and a bookseller technology stocks? Maria B. ? -g-). All you have to do is use 7th grade math to see what sales these two will have to generate in order to have a P/E ratio of 15 on the current price, and compare the number to the total global market for their product. In no way I am saying that MSFT, CSCO, YHOO and the rest of the gang are not extremely overvalued, just that in DELL's case it is easiest to see, and the most difficult to justify. Anyway, I expect the first support for the NDX to be in the low 1700s, and would still consider it extremely overvalued at that level. Edit: last week was one of my best ever in terms of calling the market (also percentage gain on my trading) exchange2000.com exchange2000.com exchange2000.com exchange2000.com exchange2000.com No way this could last much longer, unless this is really going to be the big one -g-. ATG