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To: DMaA who wrote (23757)	3/19/1999 11:31:00 AM
From: John Stichnoth	Respond to of 77397

OFF TOPIC-- Dow 36,000 Article. For starters, the implied PE's get all out of whack. If you anticipate that earnings will grow at 15% per year for 5 years, you double earnings. But sales aren't going to grow anything close to that, and margins are already at historical highs, so... Pe's are already at 20, say. To get to 36,000 PE's would have to rise to 36 (based on 15% earnings growth), with visibility for continued growth out past the five years. To justify a PE of 36, you have to be able to foresee several years further earnings growth at those high rates. Risk must be measured within a given forward time frame. To say over the entire period of the stock the risk is more or less is not the point. The risk should be measured from today moving forward. (To some extent the sample was biased, since in the study cited, the end period was after a period of unusual growth without substantial corrections). Just some thoughts. JS

To: DMaA who wrote (23757)	3/19/1999 3:16:00 PM
From: James A. Shankland	Respond to of 77397

I'm looking for some serious criticism of that article. Well, I'll take a quick stab. I only gave the article a quick read, but his math looks faulty to me. He cites the fact that business earnings increase (though of course they don't always), whereas bonds make fixed payments. But they don't: interest payments get reinvested, creating "earnings growth" through compounding in a bond portfolio. His points about increased public sophistication and broader stock ownership have some merit. But it remains to be seen whether the public will become disenchanted with stocks in a more sustained slump. Finally, we've seen arguments like this before: when the Nikkei was at 46,000, there were earnest arguments made that it was not overvalued, and that it would be breaking 50,000 within months. That was about a decade ago, and it never did. It does seem to be showing some signs of life now, though, having just broken 16,000. Ditto with US equities in the early 70s. So far, these arguments have proven wrong without fail. But maybe this time will be different. Place your bets.