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I am neither a bull nor a bear. Some stocks go up and some go down no
matter what the market conditions, so it is the charts that dictate what
the trade should be. I do, however, read various things when I have no
position in the market and don't intend to trade the next day. Here are
some interesting facts that I thought might be of interest to this
forum.
After scanning the top 100 volume leaders on the Nasdaq and NYSE I found
that the majority still have astounding PE ratios. The only ways to
reduce the PE are reduction of the number of shares, increase earning or
reduce the price of the stock. Reducing the number of shares is what is
happening with the buy backs going on, but the reverse is true with the
exercise of maturing stock options.
Now what happens to some of the big names. Lucent: $8billion in debt,
$0.3 billion in cash and still losing money. Nextel: $4.7 billion in
cash and $18.8 billion of debt. PSINet: $3.4 billion in debt,
$300million annual interest expense and still hasn't earned a dime.
Here are some other companies swimming in debt. Amazon, CableVision
Systems, Paxson communications, Del Monte, Coca-Cola, Trump Hotels &
Casinos, Ford, J.C.Penney, Campbell Soup, AOL Time Warner, Motorola and
it is my understanding the even GE owes $6.88 for every dollar of
Shareholder Equity.
To the best of my knowledge the source of this information is accurate,
but you should research it for yourselves. If this is the case and
business doesn't pick up then the markets have a great deal further to
contract. What happens if companies like Motorola, Lucent, XRX start
going bankrupt along with Sunbeam that had $1.7 billion in loans. ?
How much bad paper are the big banks holding on bankrupt dot coms and
soon to be bankrupt companies like LTV. Is it true that Bof A has $4.5
billion in loans that now pose a credit risk.
Just some obsevations to add to the mix. Ira.
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