Wednesday, July 12, 2006


One must go back more than 10 years to find better stock market valuations. Ten years ago, the projected earnings to price ratio for the S&P 500 Stock Index was below where it is now but US 10 year treasury bond yields were higher. You may recall that the following four years were wonderful years to be invested in these stocks. My belief is that treasury bond yields, which were down again today, are headed for the 4% range. Should the yields reach 4%, stocks could easily support P/E ratios of 25! Current earnings projections put the ratio at less than 14. Assuming no increase in earnings and one could still imagine stocks going up 78%! Wow! (25/14 = 1.78).

Now don't go running around telling folks that I said the market is ready to move up 78%, I can imagine it happening but I am not predicting it to happen. In the energy area, I believe earnings will go up this year but I believe PE ratios will decline. The net result will be that most energy stocks companies will enjoy good earnings but the price of the stocks will not go up.


Pirates of the Caribbean set box office records. Disney is on a roll.

Chip makers are ordering equipment; orders up 24.8% so far. MSFT will release Gargantua programs by January 2007 expect to buy new machines if you want to run the new stuff. Buy equipment and software companies if you want to make money.

MSFT and Google are in yet another race. MSFT will probably be first to market with a hand held combination device that will be kin to a game boy, kin to an I-Pod and kin to a portable computer. The Google product will be more of a GPS mapping, location service and communication device. The market for these products is going to be huge. Expect continued merger activity in the equipment makers, along the lines of the Nokia deal. Motorola, Texas Instruments, Nortel and others may need to get big in a hurry or they may need to partner with Google .

There's so much more to talk about, write me