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The Daily Dow LEXINGTON, KY. (December 6) -- Did you ever wonder just how little it takes to send the stock markets into a panic attack? After watching the foreign markets' actions over night, Wall Street followed suit as the Dow plunged 145 points before recovering its feet, all in response to ambiguous comments in a speech made last night by Federal Reserve Chairman Alan Greenspan. It appears it takes precious little! Greenspan discussed the dangers inherent in the market when "irrational exuberance" prevails, and quick to read between the lines, traders around the world assumed that Greenspan was referring to the current market rise. But was he? He certainly did not say so if you look at more than those two words of his commentary (which admittedly is hard to do given the five-second sound bites fed us by the television news today). In fact, today's release of November's employment data actually suggests that the economy and inflation are still very much in line for the sustained-growth/low-inflation scenario we've enjoyed of late. Let's look at Wall Street's view of the Dow again as a barometer. According to today's update by First Call, the 1997 consensus earnings estimate for the Dow Industrials is $432.02, up slightly from four weeks ago. With the DJIA closing today at 6381.94, the Dow is trading at 14.8 times next year's earnings. The median estimate for next year's P/E ratio, however, is 16.5. Using that as the multiple for next year's earnings, then, the consensus estimates would support a Dow of 7128.33, some 11.7% higher than today's closing level. Not remarkably, that's virtually dead on the market's long-term growth rate. So you make the call. Is the market overvalued because it's gone up some 25% this year? Or is it fairly valued and very healthy at 14.8 times next year's earnings estimates? In company news, Chevron announced that it has signed an agreement to acquire a 15% equity stake in an oil pipeline linking the Tengiz field in western Kazakhstan to the Russian coast of the Black Sea. The proposed capacity for the pipeline is 1.5 million barrels per day and construction is expected to cost roughly $2 billion and take until 1999 to complete. Also today, The Wall Street Journal reported that Eastman Kodak has named Daniel Carp as president and chief operating officer in a move being interpreted as a sign that Carp is to be groomed as Chief Executive Officer George Fisher's heir apparent.
Today's Dow Numbers Stock Change Bid ------------------- DD -2 1/4 95.63 CHV -1 3/8 64.38 MMM - 7/8 81.63 EK - 7/8 80.13 IMN +1 1/8 31.25
Day Month Year History
FOOL-4 -1.66% 1.88% 28.88% 28.88%
DJIA -0.86% 5.85% 24.72% 24.72%
S&P 500 -0.64% 4.87% 20.08% 20.08%
NASDAQ -0.96% 5.42% 22.39% 22.39%
Rec'd # Security In At Now Change
1/2/96 142 DuPont 69.88 95.63 36.85%
1/2/96 149 3M 63.76 81.63 28.02%
1/2/96 380 Chevron 52.38 64.38 22.91%
1/2/96 148 E. Kodak 67.00 80.13 19.59%
7/16/96 14 Imation 26.16 31.25 19.47%
Rec'd # Security In At Value Change
1/2/96 380 Chevron 19902.50 24462.50 $4560.00
1/2/96 142 DuPont 9922.25 13578.75 $3656.50
1/2/96 149 3M 9500.09 12162.13 $2662.04
1/2/96 148 E. Kodak 9916.00 11858.50 $1942.50
7/16/96 14 Imation 366.21 437.50 $71.29
CASH $1942.85
TOTAL $64442.23
Transmitted: 12/6/96
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