The Stingy News Weekly (07/14/02)
The Markets This Week
DOW 30: 8,685 -7.41% with a median P/E of 28.8
S&P/TSX: 6,820 -4.11% with a median P/E of 31.1
The Value View
Dow at a P/E of 20: 6,031 (-30.6%) Poor Value
Dow at a P/E of 15: 4,523 (-47.9%) Fair Value
Dow at a P/E of 10: 3,017 (-65.3%) Good Value
S&P/TSX at a P/E of 20: 4,385 (-35.7%) Poor Value
S&P/TSX at a P/E of 15: 3,289 (-51.8%) Fair Value
S&P/TSX at a P/E of 10: 2,193 (-67.9%) Good Value
Anatomy of a bubble
Skip the text but take a look at the historical P/E charts. BTW, the S&P500 is now at 921
Bill on character
"Lending is not based primarily upon money or property. No sir. The first thing is character."
Adviser fires cautious client
"Dorothy Aaron transferred an unregistered portfolio to Assante Financial Management Ltd., an affiliated mutual fund firm, in March, 2000. She was advised to sell her Royal Bank mutual funds, but wasn't warned about the substantial capital gains associated with the sale. She had to cash in some of her new mutual funds, incurring hefty deferred sales charges, to pay the large tax bill."
Breaking records--for bankruptcies
"Chapter 11 is the hottest fad in business. But that's not even the half of it."
Top money losers
"These 25 companies lost the most money in 2001."
Accounts must be brought to book
"Bad accounting is an evil. But it's not unique to companies. The decline in standards has affected government accounts as well. There are examples both sides of the Atlantic. WorldCom has been lambasted for reclassifying current expenditure as capital. The same thing has been done in the national accounts of the US."
The buy-'em-up boondoggle
"But as with any addiction, the growth-by-bulk-acquisition approach necessitates increasing doses of the drug to preserve the high. The only way to keep revenues growing fast enough for Wall Street is to buy ever more companies. That requires a bottomless pit of cash, a high stock price, or both. If the deals stop, the economy hiccups, or the parts don't mesh exactly as planned--one of which is bound to happen--the result is usually ugly."
Don't blame it all On WorldCom
"Investors are angry, and crooked CEOs make convenient villains. But that's not why stock prices are down."
The inside story of Level 3
"It's a saga that brings together Bill Gates, Bernie Ebbers, Bill Miller--and even Warren Buffett. It travels from the Flaming Gorge Dam to the very backbone of the Internet, but mostly to downtown Omaha. And it may just be the most unexpected survival tale of the telecom era."
The trivia questions this week are:
Q1. Who said "If bankers are busy; something is wrong."?
Q2. Who said "Lending is not based primarily upon money or property. No sir. The first thing is character."?
Q3. How far has the NASDAQ fallen from its peak?
The answers for last week's trivia questions are:
Q1. Who said "October is one of the peculiarly dangerous months to speculate in stocks."?
A1. Mark Twain
Q2. What is the sentence that follows the quote in Q1?
A2. "The others are July, January, September, April, November, May, March, June, December, August, and February."
Q3. Who said "Remember, my son, that any man who is a bear on the future of this country will go broke."?
A3. J.P. Morgan
Source: The Bear Book by John Rothchild
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