No matter what happens (incoming AOL CEO Richard) Parsons and gang are going to concentrate on calming market expectations. Period. |
Oddly, it was sparked when Lucent's chairman said they were going to be profitable, believe it or not. And then what happened it seemed that the basic industry stocks started to do somewhat better. |
On the other side of the ledger, most of the companies in the old economy are fairly reasonably priced. So, a couple of weeks ago we started to see a shift. First, the energy stocks did somewhat better. Then, the pharmaceutical stocks had quite a run. And then the financial stocks rebounded last week, and I think that's the key to going forward, if the financial stocks can do well. |
Overall, my guess is this is a rally in a bear market. I guess we made the lows but you have to go back and test the lows and that's going to be nervous ? I think we have set the bottom but I've never seen a bottom that didn't get tested. |
People lost money last year and now they have to pay the tax bill -- 'They're saying I lost money and now I have to write a check.' They're not thinking about earnings or warnings. |
Production is declining at about a 4 percent annual rate right now while consumption is increasing between 2 and 4 percent. So inevitably the price is going to have to go up. |
Right now [Fannie Mae] is trading at a price to earnings multiple that is below its growth rate, yet Fannie Mae is one of seven companies in the S&P 500 that's grown its earnings double digit for the past 13 years. |
So, I think when you're at that sort of multiple level, there's very little you can do to fulfill the expectation and an awful lot that can happen that will disappoint investors and give you significant downside risks, ... Having said that, a lot of stocks in the tech sector are trading at multiples that are within a coffee cup visit of their growth rate. And I think that might make a whole lot of sense. |
So, I think when you're at that sort of multiple level, there's very little you can do to fulfill the expectation and an awful lot that can happen that will disappoint investors and give you significant downside risks. Having said that, a lot of stocks in the tech sector are trading at multiples that are within a coffee cup visit of their growth rate. And I think that might make a whole lot of sense. |
That's a dangerous game, |
The advance is very thin, |
The advance is very thin. Get 10,000 out of the way. |
The bottom line is earnings will be good. |
The cycle of capital spending is behind them. They spent a whole lot of money the past couple of years buying or refitting their locomotives, which is a very expensive proposition, ... So you're going to find free cash flow in these companies, rising earning because the economy does well and they're trading at only about 12 times earnings. |
The data's mixed on the economic side but we have absolutely no confidence whatsoever when profits start to grow. And I think we need that before the market can improve. |