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I re read your post. I didn't state that the splits made the market go up or
down, just that it increased the volatility. If that is true then the indexes
will rise or fall a greater amount with less movement in the stock. I think we
both fell into the category or seeing what was written and not
.............etc.,
Dorothy Carter wrote:
> 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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