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I think this is going to be exacerbated by Reg FD. The Street is used to
having companies call them and say "Uh, I think your projection is a little
high." so the FirstCall could bundle up everyone's EPS estimate for a given
company and come up with a target that companies would magically hit,
quarter after quarter.
I used to go to the NASDAQ website during earnings and marvel at the count
of beat earnings/met earnings/missed earnings. The count would always be
something like 3 beat/22 met/1 missed. How the hell did they do that? To
the penny!
But no more. Now the analysts are going to have to earn their pay and do
real legwork to figure out what a company is going to earn. WallStreet used
to be extremely predictable in this fashion and that's what WallStreet
loves: predictability. Therefore, they could let Cisco sell at 100 times
earnings and it would be okay, because if WallStreets projections got too
far ahead of reality, Cisco would call them and say "Ahem..." and they would
sell their overweighting and then tell the rest of us a few days later that
they were lowering projections. And then Cisco would beat estimates by 3
cents like they do every quarter.
But now things are going to less predictable. And what does WallStreet
hate? Unpredictability. That's why they have analysts. Are the
Merrill-Lynch traders going to be willing to carry a million shares of LLTC
if they aren't going to be the first ones to know if LLTC might not make
earnings? Uh-uh. Therefore, LLTC ain't going to trade at 100 times
earnings. Ditto the other formerly high-flyers.
And REG FD couldn't come at a worse time. During a period when earnings are
slowing and P/E are contracting on their own. The final washout may not
come until January when fourth quarter earnings are reported.
Everyone has been complaining about the presidential squabble. People will
next be waiting for December 12 when the Electors are officially named. And
then December 18 when the Electors actually vote. And then there's a Fed
meeting sometime around there so no one is going to be doing a lot of buying
in front of that. And then no one is going to buy hard right before
Christmas because this year it's right after a weekend and The Street will
want to know how that weekend goes. And then we're right in front of fourth
quarter earnings which are like that black obelisk from 2001: An Earnings
Odyssey.
John Roque (sp?) was on with Insana in the first quarter of this year and
noted that the NASDAQ was trading at 4 std deviations above it's 200-day MA.
He was on a few months ago and posited that we might not be done until the
NASDAQ is trading at 4 std deviations below it's 200-day MA.
Then again my boss was asking me about funds that short the NASDAQ today so
today might have been the bottom.
Kent
-----Original Message-----
From: Don Ewers <dbewers@xxxxxxxxxxxxx>
To: realtraders@xxxxxxxxxxx <realtraders@xxxxxxxxxxx>
Date: Thursday, November 30, 2000 7:52 PM
Subject: Re: Fwd: Re: [RT] Re: Time to buy????????????
First PE contraction (expectations softening), now earning contraction
(reality or a slowing economy) . . . both can be destructive to equity
portfolios.
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