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I don't remember the details how the NYT author arrived at the 811 PE (the
claim engendered some detailed analysis on another list) but it was not your
normal PE calculation so I would take it with a grain of salt. I believe
that the PE of the NASDAQ is something north of 100% using generally
accepted practices.
Earl
----- Original Message -----
From: "Don Ewers" <dbewers@xxxxxxxxxxxxx>
To: "jerry swanson" <swanwoods@xxxxxxxxxxxxx>
Cc: "Real Traders" <realtraders@xxxxxxxxxxxxxxx>
Sent: Thursday, February 15, 2001 1:01 PM
Subject: [RT] Re: a note to don
> Jerry thanks for the PE article below. Makes sense that the PE ratio could
> actually rise(due to lower earnings, never thought of that.
>
> I know EW does not work all the time, nothing does. In fact when it does
not
> it tells you something. An example is on the 60min bonds a complete 5 wave
> pattern would have taken the bonds above 105-14 (and more likely to 105-23
> to 28), but the pattern failed when 103-24 taken out. That tells you
> something. The daily is still in play but the failure likely means the
> waveC:4 is underway. That tells you something also. So either way it gives
> me clues. I have Miners book but have not cracked it yet. His software is
my
> next purchase though I believe. Sometimes the patterns are not there and I
> move on, since I have learned not to force a wave count as you said.
>
> Again thanks for the article. I will try to send it back through the group
> so others may see it.
> don ewers
> ----- Original Message -----
> From: "jerry swanson" <swanwoods@xxxxxxxxxxxxx>
> To: <dbewers@xxxxxxxxxxxxx>
> Sent: Thursday, February 15, 2001 12:43 PM
> Subject: a note to don
>
>
> > Don:
> >
> > The following appeared on the NY Times a couple of days ago; it was too
> > large, perhaps, for the RT board, so here it is. Not sure if this is
what
> > you meant. I noticed that ndx took out it's 78.6% point of 2285 and so
I
> > thought the count was wrong, but it came back the next day. I bought
> > Miner's book a couple of months ago and have really come to appreciate
his
> > approach. I particularly like the point he makes that EW only work
about
> > 50% of the time. The real significance of that is that they don't work
> ALL
> > of the time and that makes more sense than always trying to force
> something
> > into a wave pattern that doesn't work.
> >
> > best....
> >
> > jerry..
> >
> >
> >
> > As the red ink flows < in a somewhat hidden manner < the Nasdaq 100 is
> > setting new standards for a price-earnings ratio by a major index. The
> index
> > is now trading at 811 times the combined earnings of the companies in
the
> > index.
> >
> > The surge in the price-earnings ratio means stocks in the Nasdaq 100 are
> now
> > exceptionally expensive on the basis of the companies' ability to
actually
> > make money.
> >
> > The ratio, which had never been above 165 before this year, reflects the
> > fact that many Nasdaq companies are reporting huge losses for 2000, when
> > their financial results are analyzed using generally accepted accounting
> > principles, known as GAAP. That trend has been obscured, however,
because
> > many companies adjust the numbers in ways that make profits appear to be
> > rising.
> >
> > "The disparity between the pro-forma headlines that companies emphasize
in
> > their news releases and the GAAP numbers has grown enormously over the
> past
> > month and a half," said Thomas Coleman, the head of research and risk
> > management for Aequilibrium Investments, a London- based money
management
> > firm.
> >
> > The price-earnings ratio is based on the earnings, or losses, of each
> > company in the index for the most recently reported 12 months. Those
> numbers
> > are weighted according to the relative weight of each company in the
> index,
> > which includes 100 of the largest companies traded on the Nasdaq market.
> >
> > The rapid rise in the price-earnings ratio, which stood at 127 at the
end
> of
> > December, does not reflect any significant change in the price of the
> stocks
> > in the index since the end of the year. The Nasdaq 100 stock index ended
> > last week at 2,261.77, down 3.4 percent for 2001. It is down 51.9
percent
> > since it peaked in March, when the price- earnings ratio was 165, a
> fraction
> > of the current ratio. Had earnings stayed the same, the price-earnings
> ratio
> > would be less than half the 165 level.
> >
> > Instead, the soaring price-earnings ratio reflects big losses being
posted
> > for the fourth quarter of last year by a number of companies, in
contrast
> to
> > profits or much smaller losses for the same quarter of 1999. Overall,
> > profits of the companies in the index are down 90 percent since the
index
> > peaked.
> >
> > The nosedive in profits is tied to write-offs, the largest of which
> appears
> > to come from Excite@xxxx, the cable Internet company, which took a $4.6
> > billion hit. Other Nasdaq 100 companies that took large write- offs
> included
> > Amazon.com, Yahoo and CNET.
> >
> > Most Nasdaq 100 companies have persuaded analysts to make their
estimates
> on
> > earnings numbers that exclude certain costs, although the excluded costs
> > vary from company to company. Most of the big losses being reported this
> > year are in the areas that are not included in the pro forma, or
adjusted,
> > earnings that the companies want investors to focus on.
> >
> > In some cases, those losses may not reflect underlying problems. For
> > example, many companies now take large charges when they make
> acquisitions,
> > to write off the value of acquired research and development work. Such
> > write-offs presumably do not represent a real evaluation of the value of
> the
> > companies being acquired and as such are routinely ignored by many
> analysts.
> >
> > Similarly, companies that acquire other companies using the so-called
> > purchase method of accounting often end up putting a large value for
> > intangible assets on their balance sheets, which current accounting
rules
> > require be amortized over up to 40 years.
> >
> >
>
>
>
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>
>
>
>
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