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IRA: read what I said.. I agreed that the splits created volatility.. I
mentioned the effect a split had on the divisor of DJIA... :-) I just said
that stating that splits were why mkt went up was probably not an accurate
statement.. pls re read my post... Tnx Dorothy
----- Original Message -----
From: "Ira Tunik" <irat@xxxxxxxxx>
To: <realtraders@xxxxxxxxxxxxxxx>
Sent: Saturday, September 08, 2001 2:34 PM
Subject: Re: [RT] s&p .. Where did that cat go?
> The splits create volatility because of the divisor. there used to be a 2
point
> move in a stock to create a 1 point move in the dow. The various splits
in the
> Dow stocks have created a situation where it takes less then 1/2 a point
move in
> a stock to create a 1 point move in the index. If a 1 point move in IBM
will
> cause a 1 point move in the Dow, then split IBM 2/1 it will take a 1/2
point
> move in IBM to create the same move. How do you think we got to 10,000
from a
> 1,000 so rapidly? Outside of the funny book keeping. The splits are one
of the
> reasons that you can have a down 200 point day and the majority of stocks
move a
> point or 2 at the most.
>
> "Dorothy K. Carter" wrote:
>
> > Well, I don't know I'd go so far as to say that splits made the market
> > rally.... there was a period where people were chasing stocks that
announced
> > a split so I guess you could say that.....I would say that anytime a
> > security goes up it is because there are more buyers than sellers......
> > splits are a form of distribution.. so that insiders can sell their
stock
> > to the masses at lower prices that are affordable....It is true that
each
> > time one of the DJIA stocks has split the volatility has increased as
the
> > DOW Divisor became smaller .. I doubt that many of the DJIA large cap
stocks
> > will do reverse splits.. My point was that once some of these once high
> > flyers go below $5 and are no longer marginable that the potential
exists
> > for reverse splits so they can maintain that status... also re NAZDAQ
> > listing.. many of the other stocks we may also see reverse splits so
they
> > can maintain their listing requirement trading above $1 I believe ....
just
> > a comment... time will tell
> > ----- Original Message -----
> > From: "Ira Tunik" <irat@xxxxxxxxx>
> > To: <realtraders@xxxxxxxxxxxxxxx>
> > Sent: Saturday, September 08, 2001 2:01 PM
> > Subject: Re: [RT] s&p .. Where did that cat go?
> >
> > > It is the splits that made the markets rally and fall with increased
> > > volatility. Reverse splits will remove some of the volatility and
reduce
> > profit
> > > potential from the indexes.
> > >
> > > "Dorothy K. Carter" wrote:
> > >
> > > > Bloomberg TV showed a chart of S & P and current P/E's based on
lowered
> > > > earnings expectations vs P/E's at March 2000 high.. P/E's were
higher
> > now
> > > > even though stocks have collapsed giving further proof that stocks
are
> > > > still grossly overvalued and nowhere near a low of significance..
The
> > next
> > > > thing we'll see is a number of the companies that have had several
stock
> > > > splits will have to do reverse stock splits.. I can't wait to see
stocks
> > > > like ORCl & CSCO do reverse stock splits .. this will be part of
the
> > > > undwinding of the excesses seen during the bubble IMO
> > > > ----- Original Message -----
> > > > From: "Don Ewers" <dbewers@xxxxxxxxxxxxx>
> > > > To: <realtraders@xxxxxxxxxxxxxxx>
> > > > Sent: Saturday, September 08, 2001 10:48 AM
> > > > Subject: Re: [RT] s&p .. Where did that cat go?
> > > >
> > > > > IRA,
> > > > > I remember those PE's, as I recall banks were at more like 4?
> > > > >
> > > > > However, in this current market environment (of excess valuation)
> > aren't
> > > > we
> > > > > "initially" likely to see rising PE's as earning fall even more
> > > > dramatically
> > > > > than the stock prices? Then after time the stock prices catch up
and
> > the
> > > > > lower PE's materialize. My point is PE ratio's at this time may
not
> > tell
> > > > us
> > > > > as much as price to book, price to sales ect?
> > > > >
> > > > > ----- Original Message -----
> > > > > From: "Ira Tunik" <irat@xxxxxxxxx>
> > > > > To: <realtraders@xxxxxxxxxxxxxxx>
> > > > > Sent: Saturday, September 08, 2001 9:00 AM
> > > > > Subject: Re: [RT] s&p .. Where did that cat go?
> > > > >
> > > > >
> > > > > > At the last market bottom, after a bear rampage, the PE ratios
were
> > down
> > > > > around
> > > > > > 6. There is still a long way to go to reach these levels. Also
the
> > > > > majority of
> > > > > > the mutual funds closed their doors during that period. We
haven't
> > seen
> > > > > the
> > > > > > massive redemptions yet or the collapse of confidence. Those
that
> > > > > increased
> > > > > > their mortgage amounts to buy stocks haven't paid the piper yet,
but
> > the
> > > > > number
> > > > > > of bankruptcies are on the rise. There are two ways to reduce
PE
> > > > ratios.
> > > > > One
> > > > > > is to reduce the price of the stock and the other is to increase
> > > > earnings.
> > > > > Let
> > > > > > us see how this works out. Ira.
> > > > > >
> > > > > > Earl Adamy wrote:
> > > > > >
> > > > > > > 1) The stock market gambling was in no way limited to the 30
> > > > > something's, it
> > > > > > > deeply infected the baby boomers, near-retired, and retired.
These
> > > > > people
> > > > > > > talked of nothing but stocks at every gathering. Now they shut
> > their
> > > > > eyes to
> > > > > > > what is happening in the market, don't want to talk about
stocks,
> > and
> > > > > fully
> > > > > > > expect that their winnings will be restored with a bit of
> > patience.
> > > > > > >
> > > > > > > 2) The bubble was in no way limited to the NASDAQ, it was just
> > most
> > > > > evident
> > > > > > > in the NASDAQ. The blue chips were and very much remain part
of
> > the
> > > > > bubble.
> > > > > > > By any gauge of valuation, the blue chips remain valued at
> > > > historically
> > > > > high
> > > > > > > levels. We are now learning that much of the productivity and
> > earnings
> > > > > of
> > > > > > > the past 5 years were fictional as extraordinary charges wipe
away
> > > > years
> > > > > of
> > > > > > > "profits".
> > > > > > >
> > > > > > > Attached find PE and Yield statistics from this week's
Barron's
> > Market
> > > > > Lab
> > > > > > > which suggest that the Dow Jones blue chips remain at lofty
levels
> > > > with
> > > > > big
> > > > > > > haircuts ahead in prices, earnings, and (especially)
dividends:
> > > > > > >
> > > > > > > a) Market to Book on DJIA remains at nearly 8x
> > > > > > > b) DJIA PE ratio is still 24+
> > > > > > > c) PE ratio on DJTA is 348
> > > > > > > d) DJTA dividends are nearly 5x earnings
> > > > > > > e) DJUA PE ratio is 48
> > > > > > > f) DJUA dividends are nearly 2x earnings
> > > > > > >
> > > > > > > Yes, the pendulum will swing far to the other extreme ... very
> > far. I
> > > > > expect
> > > > > > > that when the smoke clears some years from now that
sustainable
> > > > dividend
> > > > > > > yields on blue chip stocks will once again exceed the yields
on
> > long
> > > > > term
> > > > > > > treasuries.
> > > > > > >
> > > > > > > Earl
> > > > > > >
> > > > > > > --
> > > > > >
> > > > > >
> > > > > >
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