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In Denial Over Deflation?

Politicians Are Ostrich-Like When it Comes to Deflation


The deflation process is well underway and -- if history is any guide -- policymakers will react too slowly and inadequately.

Those of us who were around in the 1970s remember a time when inflation was not part of the everyday language of the citizenry. Today, everybody knows what it is. It took several years before inflation became entrenched in the hearts and minds of consumers. It was only taken seriously


it became a serious problem.

I think policymakers will slow the process of deflation, but not extinguish it. Tax breaks will help. Then, just as they think it is no longer a problem, it will return worse than ever.

Did you ever get sick and the doctor give you an antibiotic and tell you to make sure you keep taking the medicine even after you feel better? If you don't, you run the risk of a relapse. Same thing here. Politicians will not take the problem of deflation seriously until it is firmly embedded in the national psyche.

Yes, a few tax breaks and some monetary stimuli will help, but for how long? We never seem to understand that the forces operating on us are bigger than the


and the government.

Everybody wants a repeat of the good old bull of the 1990s in this business. I would very much like to see my dear departed father again, too. Neither is going to happen, but their spirit lives on, haunting us for as long as we live.

Michael Shamosh, Irvington, N.Y. (Received 11-14-02)


TheStreet Recommends

The Five Dumbest Things on Wall Street This Week

UAL Employees Say ESOP Shares Sale is 'Irresponsible'

Dear Mr. Two Cents,

I thought I would write a note on your article concerning the


pilots "throwing a temper tantrum."

The reason that the UAL employees, not just the pilots by any means, are upset by the sale of our ESOP shares is not about our retirement being diversified. This was set up as a separate retirement account, a sort of supplemental retirement, if you will.

Although we all took a major hit on our 401(k)s throughout most of the ESOP (deal) by not being able to invest, sincewe could not contribute while the UAL shares were high, we do have a company-sponsored retirement plan.

This ESOP, although widely unpopular among many employees, was about having some say in how the company was governed. It was also a way to bail UAL out of hard times and save jobs. Most of us didn't believe that we would get any kind of substantial retirement benefits out of the stock. To hold the stock until it can't fall anylower, and then sell, doesn't sound like a responsible way of managing a retirement account.

The reason people are upset by the sale is two fold: First, the stock is nearly worthless. Selling at $2.00 per share, while we paidapproximately $46.00 a share, is too little too late. Most of the employees are down to just a $2200 form the $60,000 or so we invested.

This is not going to make a difference in my retirement at this point. You can't get much stock for $2200, yet none of this "diversification of funds" was thought of when the stock was $80 a share. That is when it would have made a difference hadthe stock portfolio been diversified.

I will risk the paltry $2200 I haveleft in the future of my company, since it is too late to supplement my retirement with ESOP stock.

The other reason for not selling the stock is we will lose any kind of control we might have thought we had in the company's direction. This may very well be the real reason for the sales. UAL may have found a way to get the three ESOP Directors off the Board without filing bankruptcy, and that may just be the whole point.

This ESOP experiment from a Wall Street perspective has been miserable at best, but it isn't over yet. There are many thousands of UAL employees who are still trying to make a difference, and who can possibly help to save this once wonderful company.

The sale is "irresponsible" in the eyes of many employees, simply because at this point, keeping the stock has more benefits than sellingit.

There is simply not enough at stake when the stock is this low to justify selling it. When you risk your money on Junk Bonds, you just have to ride it out, or simply lose it all! The employees all helplessly watched while this stock plummeted. Selling low and buying high is not what I would call "responsible."

Richard Turk, Benicia, Calif. (Received 11-11-02)


Opportunity Glitters in the Rubble

Welcome Judgment Day for RBOCs

Jim Cramer et al,

I would like to balance your perspective a bit regarding the "Baby Bells."You have been championing their cause lately, arguing that companies thathave recently gone through bankruptcy might have an unfair competitiveadvantage in the marketplace.

Beside the



Global Crossings

,this would include the CLECs, such as


, and the DSLs suchas


. Many of these companies have failed, gone through the system, are purging their balance sheets via reorganization in one form or another, and arecoming out the other side as lean machines.

Our bankruptcy laws serve a valuable economic function, as an important safety net that protectssociety. It would be dangerous for us to tinker with, or rather, tamper with,these time-tested processes after the fact.

In a recent


, Prudential's Yardeni called these companies "zombies."I think that this is an apt description. Is it possible, Mr. Cramer, thatthe RBOCs had the unfair competitive advantage from the outset, throughtheir protected monopoly status, and that these companies used or evenmisused that advantage to try to put the "upstarts" out of business?

Could it then be possible that the RBOCs created their own "Night of the LivingDead," in that having killed off the upstarts, these upstarts have now comeback to life as zombies, drained of their souls (their former equityholders), and are now impossible to kill?

Is it possible that the RBOCs' strategy has now backfired on them, and that they deserve the result?

Ultimately, the true culprit is the Congress for tampering with the freemarket. The government created the (RBOC) monopolies that initially becameanticompetitive, and then subsequently, so competitively advantaged thatthey distorted the market place in the other direction, killing off thenewly created competition.

I strongly disagree with your assessment that the RBOCs "did it right," and are now being punished for it. Maybe they should have abided more by the spirit of the Telecom Act of 1996, and cooperated. It might have been the better course in the long run.

The law of unintended consequences can be harsh; the market giveth and the market taketh away in unexpected ways. The RBOCs should have been careful whatthey wished for. Now, perhaps, they deserve to pay the price.

Yours truly,

Elliot M. Simon, Harpers Ferry, W. Va., (received 11/04/02)


Cable's Growth Worries Take a New Twist

Mark Cuban Weighs In


I love to short stocks as much as anyone, and have been short the last three years. The only longs I have are in cable and satellite. Believe it or not, they are not mutually exclusive, and there is room for both to do well.

The pro for satellite is easy. The cost per additional basic sub is marginal. So they are pushing the low end, as they should. That's great.

For cable, the opportunity is not in the low end, it's in the high end doing all the things that satellite can't. Satellite isn't two-way. So rather than trying to compete on price, why not "hit them where they ain't?", which is two-way services like broadband, and more importantly, HDTV. It's also the explanation why you see a decline in basic, while operating cash flow and revenue increases.

Ask the shorts what happens when HD takes off in the next two years, and it will. An HD channel takes up 19.4mbs per channel. If the typical channel today uses 3mbs or so, that's six channels that have to get bumped for every one HD channel that's added. Where is the bandwidth going to come from? Particularly if there is no merger? Think there will ever be HD local in local? Think there will be the same number of channels offered on satellite as cable? They can't do it. They can't do localized programming. Cable will service all the higher-end services, while satellite takes those who don't have HD, or are satisfied with limited HD and/or the price.

So then the obvious question becomes, are there enough customers to go around for each?

There is room for both, but they will definitely serve different niches.

Mark Cuban, Dallas, Texas (received 10/31/02).


Cuban is owner of the Dallas Mavericks basketball team and president of HDNet, a high-definition television programming service available on DirecTV


Coming Home to Cable

In George Mannes' article, his short-seller source states that cable operators have new worries because the number of new basic cable subscribers is falling due to DBS. He likened the trend to McDonald's having to open new restaurants to sell the same number of burgers.

That may be true if basic cable was the only product that was for sale.With the growing take rates of the very profitable high speed data andvideo on demand offerings, I see well-run cable TV companies easilydoubling the amount of revenue they receive per subscriber in the nearterm. Over time, as more existing DBS customers get the high speed databug and look to their cable company for that service, they will also returnto cable for their video services as well, especially so, as their DSSsystems fail over the next five years.

Ron Dupont, director of Operations and Engineering, Daniel Island Media Co., Charleston, S.C. (received 10/31/02)

Comcast Downside Is Overstated

George Mannes,

Brian Roberts pointed out in the


(CMCSK:Nasdaq) earnings presentation that while they do have to focus on subscriber losses, the real revenue growth isn't going to comefrom adding subscribers but from levering existing subscribers.

The margins on hi-speed data are stunning and far superior to adding abasic subscriber. I didn't think anyone expected much revenue growthin the cable industry from subscriber additions. From a cash marginperspective, it's actually a losing proposition.

While I think you are correct in pointing this out as an issue, I suspectthe downside is vastly overstated. As Brian pointed out, those mostsusceptible to the satellite product are those companies behind thedigital investment curve. Moreover, as Comcast lost customerssequentially, they increased revenues and cash flow by over 12%. Freecash flow came in at $262 million and balance sheet debt dropped by $700 million andthey've been able to cover near-term liquidity requirements.

If you are going to talk about the subscriber loss you should balancethat note with the impressive margins. If I remember correctly, Robertssaid margins were 83%. I wouldn't think that was legal. Note that inthe next day's Cox release, management mentioned they are about toincrease the price of their hi-speed data product by $5. 83% margins


pricing power! In this economy!

I also think many bears focus on the telephony product excessively. Comcastisn't chasing it because neither the technology nor the margins arequite there and it will incite competition they don't really need.Telephony pricing has collapsed and might still be falling. Comcastwill let Cox and others develop this product as they focus on their highmargin products and merger implementation.

There's time to wait andevaluate a superior entry point. How can you predict pricing in thisenvironment? If you can't do that, how do you size your effort tomaximize margins?

Whenever corporations manage their business to cash flow, they are


better managed compared to those managing toward reported net income.Comcast is clearly focused on cash flow and it is going to pay off.

Rick Wootten, West Chester, Pa. (Received 10/31/02)


Fleecing the Shareholder: How They Did It

In Dear Old Dad I Trust


Whenever I want financial advice, I call my father. For 35 years, he owned small corporations and partnerships, made good money doing so, retired, and now invests in the market. When the bubble first burst in the middle of 2000, he downplayed it, said it was a natural phenomenon -- just like in the 1950s, after everyone bought a new refrigerator and television, sales tapered off but did not end. So it goes with the New Economy, he reasoned.

But then, after the







Global Crossing



debacles, he became much more skeptical. This was not a market adjustment but seemingly systemic fraud coupled with bad management.

His advice: Invest in REITs and preferred utility stocks that pay dividends, look for tax-free municipal bonds, keep a lot of cash on the sidelines, hang up on brokers, dump the mutual funds.

The old man is a careful investor. He researches companies and reads their financial statements. Once he realized he couldn't trust his own research, his approach was decisive: Minimize your exposure, cover your assets. Some might say the old man is too cautious, but he's yet to be fleeced -- sheared a bit perhaps, but not fleeced. We should all be so lucky.

John D. Cutaia, Littleton, Colo. (received 10/16/02)

As for My $90 Million. ...


I read the article "Fleecing the Shareholder" by George Mannes. While it was a good start on the methods of fleecing, it neglected to mention the concept of excessive compensation for management. It also indicated


was just plain incompetent, which resulted in a share price drop.

Speaking as a shareholder, I would like to point out the horror that I felt when I read about the $90 million "go away" payment made to Michael Ovitz who left the company after somewhere around a year's time. Nobody should get $90 million of


money. Who approved that deal? I want him, her and them fired.

I can live with the incompetence or cyclicalities that may have caused the Disney share price to fall to its current levels. I made the decision to invest, and while I clearly overpaid for the stock, I believe that I signed up for those risks; and the resulting change in the business and/or management team can be brought about in the normal course.

However, I didn't sign up for the lack of good judgment and complicity of silence that was used by the approving executive-decision maker and compensation committee that resulted in that compensation package being approved and even worse, paid. Those people violated their fiduciary duties to the shareholders. I want them terminated now, without severance.

Unfortunately, it is blunders like that which have resulted in the lack of confidence of potential share buyers and have contributed to the lack of purchase demand for the stock.

Lewis Rieck, River Forest, Ill (received 10/15/02)


Hear Hindery Roar: Tech Glut's Too Much

Homes Lack Fiber


Modernizing the telecommunications infrastructure is indeed like roads and bridges (much as I dislike the analogy, given the rampant corruption there), and the traditional capital markets funding simply won't work here. If capital markets had funded America's roads, there would be 15 highways between San Francisco and LA, and none in Kansas.

We need government to step in and make sure fiber to the home is ubiquitous (regardless of the initial ROI on it). This will then jumpstart the "Internet trucking" industry by giving it somewhere to take goods.

Venu Vasudevan, Palatine, Ill (received 10/10/02)


Goldman Flap Puts Feds Back in Spotlight

Take Spinning Out of the IPO Equation

What to do to prevent "spinning" of hot IPO stocks (assuming these at somepoint return to center stage)?

The argument is that share allocations should not be used as an inducementfor banking business by the companies that employ the executives receivingthe allocations. The simple fact of the executive receiving the allocationand making the quick profit therefrom means that even without any directpressure to provide the banking business, the executive would be tempted todirect the business that way. After all, why give business to someone elsewhen this party will provide services at the same level, yet is friendly inother ways as well?

As long as the possibility for profit remains, thebasic impetus behind this and similar practices will continue. Notwithstanding, I hope that any legislation devised will not be so constraining as to limit normal market processes. There is no reason these executives should be discriminated against simply as a result of their positions.

Frederick L. Lukoff, Brussels, Belgium, (received 10/4/2002)


10 Most Wanted on Wall Street

Corporate Compensation No Laughing Matter

I just read your "10 Most Wanted" article and quiz. Although I was trying not to laugh at how ludicrous some of these perks are, I had to painfully remind myself that I lost my piece of the pie, just like everyone else.

Executive compensation packages are out of control and have been for years. I often wonder how these guys can sleep at night. Maybe because they are not accountable for their failures (like most employees) and simply have the option to step down after the facts come to light and their millions have been made.

How many employees could have kept their jobs with Bernie Ebbers' $408 million. But in reality, don't we as investors allow this to take place? I say, strip them all of their wealth and put them on the street or flipping burgers at McDonald's -- just like some of their former employees have had to do to survive.

David Holub, Fort Worth, Tx., (received 10/03/02)


10 Most Wanted on Wall Street

Xerox Pays for Exec's Misdeeds, Again



(XRX:NYSE) is once again the latest poster child for bad behavior on the part of corporate executives. The U.S. Attorney in Connecticut has decided that he must investigate the


issues that the


just finished its investigation on a few months ago, for which Xerox has already paid a $10 million fine to settle! Isn't there such a thing as double jeopardy for corporations?

The main point I'd like to make is that I'm tired of seeing


having to pay the fines, when it's the highly paid executives (or former execs, as in the cases of Xerox,





Global Crossing

, just to name a few) who did the dirty deeds! Go after the


. People -- not the companies!

All these fines and investigations seem to me like closing the barn door after the horse is gone. All they accomplish is to further depress the stock price of already depressed stocks, and line the coffers of government agencies.

Maybe I'd feel differently if, for example, the $100 million fine Merrill Lynch had to ante up had gone to investors who had lost money based on their stock recommendations, or if Dennis Kozlowski had to pay


fines to stockholders who lost thousands because of his criminal behavior -- but it didn't, and it won't. It's a shame. The stock market is dying, and the attorneys general, the


and Congress are playing Dr. Kevorkian.

And that's my two cents worth.

Linda Stevenson, Williamson, NY (received 9/24/02)


Wireless Price War is Slow Suicide

Lower Wireless Rates Would Benefit the Industry


In fact, the opposite is true regarding your piece that a wireless price war would be suicidal for the wireless telecom industry.

Telecom companies invested massively in infrastructure during the halcyon days of the late 90s and now have substantial excess capacity. This excess capacity is a sunk cost and earns the companies nothing, if not utilized. At the same time, the marginal cost of supporting additional cellular callers is little or nothing, so the addition of callers to the network results in much of the revenue contributing to the bottom-line earnings and cash flows.

Lowering marginal rates for new users, or even for the entire population of users, makes eminent sense as long as the total revenue expands faster than total costs, which in an over-capacity, high-fixed-cost business, such as cellular, is exactly the situation.

In fact, if all carriers reduced rates further, it is quite likely that a significant jump in number of users and total revenue would occur, and the economics of the entire industry would improve.

C. A. Peck, Sarasota, FL (received 9/13/02)

Desperate in Seattle for Faster Wireless Service


I fail to see how


(T:NYSE) aggressive pricing plan for its new high-speed network is "suicidal" for the wireless telecom industry or "unfortunate" for the consumer or AT&T.

Just the opposite is true. Our small company is an early adopter of wireless data services, using our cell phones as wireless modems to connect our laptops to the corporate network while traveling. The speed of the existing wireless infrastructure is glacial at best, and we are hungry for faster service.

Unfortunately, our service provider (


) has priced their new high-speed data service on a per-megabyte rather than a per-minute basis, which would easily triple our monthly fees. Needless to say, we'll be sticking with our existing service for the foreseeable future. I can only hope that Sprint's rate structure is a result of limited capacity and will change as they add bandwidth to their network.

Until and unless the wireless carriers stimulate demand for 3G services with rational pricing, the carriers will continue to suffer from low growth, the suppliers will remain moribund by low capital spending, and the consumer will treat his or her wireless phone as an appliance rather than a powerful tool.

David Basiji, Ph.D.; CTO, Amnis Corp.; Seattle, Wash. (received 9/13/02)


Broken Bonds

Touched by a Tribute

Dear Sirs,

Thank you for publishing the article by Kevin Burke titled "Broken Bonds".

I found this piece to be a moving tribute by Mr. Burke and a fitting one that captured the full range of feelings and emotions regarding Sept. 11.

News report after news report details every event that happened that horrible day. I continue to be stunned at the tremendous human toll taken that day and the toll left on the survivors. Mr. Burke conveyed that toll in a very human way. I work in the brokerage industry and can tell you a big hole was left when many fine people were taken that day.

Mr. Burke's feeling of anger and revenge should not be a cause for shame or remorse. That anger is well placed and will guide this country as we strive to eliminate the threat of terrorism. The human need for revenge will fuel our motivation as we eliminate the threat from those who dare to make war on the innocent and noncombatant. As Americans and as protectors of freedom, we have no other choice.

When I finished Mr. Burke's article I watched many other memorials on the various news networks and services we have at our office. I saw the tremendous pride and might of our nation on display. I was reminded of the passage in the book

Band of Brothers when the American army is entering Germany in truck after truck and tank after tank for miles on end.

The German prisoners are traveling in the other direction on horse and wagons. Our troops yelled at them "What were you thinking: You have horses, we have Ford, General Motors, my God, what were you thinking." Mr. Burke, rest assured that those who murdered your brother and the rest of the innocent that day will be asked the same question.

Thank you, once again, for a fine article.

-- Frederick Olivari, Mt. Laurel, NJ (received 9/12/02)

Re: The Preceding Letter on Amtrak

The letter submitted by the National Association of Railroad Passengers'director, which stated that long distance routes can better be served byairlines, ignores the important role Amtrak's long-distance trains play inthe transportation picture.

These trains provide basic workaday transportation to thousands of people in hundreds of cities and towns across the country, passing through the hearts of the communities on the freight railroads that serve them. Many such cities are miles from any airport, and oftentimes bus service is limited or nonexistent. The mail and express service they provide is useful to many small businesses.

These are not purely "leisure" or "luxury" trains as sometimes alleged, although they do participate in the nation's important tourism industry. Anyshortfall in performance is usually due to the (lack of) dedication of the railroads whose tracks they use. Some are better than others.

For that matter, there are many people who would prefer to spend the extra time on a long-distance train between remote endpoints in a spaciousenvironment rather than experience the cattle car surroundings on anairplane, with airport hassles increasing every day.

I speak as a former member and director of NARP myself, who resigned fromthe organization many years ago due to their bias toward short-distancecorridor routes and their insistence on downplaying the vast interstaterail market that Amtrak has never made any dedicated effort to develop.

-- Marvin Daniel Monaghan, Garland, TX, former board member, Dallas Area Rapid Transit (received 9/5/02)


The Five Dumbest Things on Wall Street This Week

Coverage Is off the Rails

The last price comparison I made (about a six weeks ago and following anotherpoorly researched Amtrak story, this time in

Time Magazine

)the fare between Washington Union Station and NY Penn Station was $147 forAcela Express and $72 for the slightly slower Acela Regional. All comparableair shuttles (Reagan to Newark) were $207 for the same travel dates. Also,note that both Amtrak stations are located in center city whereas theairports are not -- thus the additional cost of transit to and from airportsmust be taken into consideration.

As far as trip times are concerned, obviously, in-flight time is far less thanon board time. However, trip times must be measured from threshold tothreshold. They must include transit time between thresholds and theairports, check-in time, etc. Numerous studies and contests (the latter bythe media) have found that the actual trip times are about the same for bothmodes. Rail passengers, however, spend most of their aggregate travel timein one place -- on board the train -- where they can productively invest thisblock of time in work (Acelas are equipped with 110 VAC for laptops at allseats), reading, resting or enjoying a meal or beverage in either the clubcar or Bistro lounge. Air shuttle passengers don't know what they aremissing.

The bottom line is that in terms of efficiencies, short hauls in denselypopulated corridors can best be served by rail, whereas long distance routescan be more efficiently served by aviation. These efficiencies can befurther leveraged when short-haul corridor trains also serve airports, thusproviding seamless transportation networks (often referred to as"multi-modal") and freeing limited runway capacity for long distance flights.This is, of course, already happening in Europe and Japan and, in spite ofignorance at some pretty high levels, will eventually happen here. As theman said in the car maintenance advertisement, "You can pay me now or you canpay me later."

Don Stewart, Fayetteville, N.C., director of National Association of Railroad Passengers ( (received 9/4/02)


Legal Worries Mount at Pre-Paid Legal

Check Your Shorts

It has gotten to the point that I can smell these dirty shorts a mile away!Near the end of Melissa Davis' story on

Pre-Paid Legal

, she discloses thefact that the stock is approximately 60% sold short. Gosh! That wouldn'thave any bearing on all the negative diatribe directed at the stock nowwould it?

Same thing with

Krispy Kreme

. At one point earlier this year it also wasdescribed as being "approximately 60% shorted" during several extremelynegative articles.

If you wonder why the common investor has turned cynical and dark, you needlook no further than the popsicle journalism being passed on as expertanalysis, when in fact it is manipulative and tainted.

My advice for the reader of this sort of article: check your shorts!

C. Douglas Weir, Mitchell, Ind. (received 8/16/02)

From One Publisher to Another




stock buyback program can't just be considered brash or questionable corporate governance," one critic said. "These guys are one jury decision away from being insolvent -- and they won't be able to raise money or borrow money after that happens."

"At best, you're getting 34 cents of service for every $1 you pay," one said. "And you're probably not even getting that because the lawyers have to be making a profit."

"We'll cover our position somewhere in the neighborhood of zero," one short said.

One critic said? One said? One short said? That is about the worst journalism I have ever seen. Why not source these quotes? Or perhaps Melissa is failing to find someone to espouse her agenda? It couldn't be more blatant that there is some personal ax to grind. ...

I enjoy some of's

stuff. Just disappointing to read such blatant personal bias. It gives


a bad name, in my opinion. Please move this story into commentary rather than "Stock News."

Josh Elledge, Eagle Mountain, Utah, Publisher, The Lake Mountain Interactive (received 8/15/02)


The Justice Department Should Shut Down WorldCom

Grounding WorldCom

Jim Cramer,

I am a


bondholder and take exception to your opinion that WorldCom itself should be punished by ending it.

I am quite amazed that you do not grasp the horrific consequences of punishing the company itself rather than significant individuals engaging in criminal behavior within the company. Punishing the company means punishing thousands of innocent employees -- many of whom have already seen their stock become worthless -- punishing all of the creditors, banks and bondholders who are also victims and would potentially lose even more.

Yes, pursue with vigor all those who willfully broke the law and engaged in fraudulent criminal enterprise. I suspect this is a handful of people who made decisions at the top of the company. But why create more untold misery on those of us who have already suffered? Clean house and bring in impeccable managers. Right the ship, don't sink it. Do not create further harm.

Sir, if you were a WorldCom bondholder or creditor, I doubt you would be so rash.


Nathan G. Schwartz, Newtown Square, Penn., WorldCom bondholder (received 8/12/02)


Clock's Ticking at Qwest

Fairness Qwest

Scott Moritz,

I feel I can speak for many hard-working


employees when I express my outrage at the slant and tone you have taken over recent months in writing about my company. Do you ever stop to think of the employees and their families who devote their lives to Qwest and its customers? Do you ever think of the good friends and co-workers who have already lost their jobs in the recent economic downturn, or the immense pressure current employees feel?

While reporting on Qwest, much of what you say relating to our financial situation is true. However, what I find disturbing are your uses of salacious verbiage, unknown or unquoted sources and innuendo. Also, even when you quote a source, you give no background on the source to let the reader decide if he or she is qualified to make such statements. Finally, you make no effort to press the source into telling you how they came to their conclusions.

Simply look at your

Aug. 8 article entitled "Clock's Ticking at Qwest." Here are a few of your unknown sources: "That's fine, say investors," "But observers note," "But some analysts scoff," "regulators in four of Qwest's 14 states," "Analysts and investors expect," "according to analysts," "say analysts." Name names, Scott!

You give CEO Dick Notebaert four quoted lines, and then spend the rest of the article bashing us with these sources. The two names you give are Glenn Reynolds with "CreditSights" and Robert Rock with John Hancock Advisors. You give no background on these people, and you made up words for Mr. Rock because there are no quotations around his statement.

While you can't name analysts, you have plenty of names to call "the teetering telco" Qwest as we "irked" creditors by "blindsiding them" with a "hostile bank withdrawal." Did you think of calling the banks before enlisting the help of "say analysts"?

You finish your love fest with Qwest by spewing three unsubstantiated statements that the sale of our yellow pages will be "in pieces," and unknown regulators will be demanding a "cut of the proceeds." Also you state: "Currently, the company's cash-flow projection puts it in line for a violation."

Luckily, Qwest has great employees who will not let your ranting change the fact that we are going to be a leader in this industry for many years. Through serving customers, hard work and our own personal investment, we will make Qwest a household name and a good one.

By the way, you can quote me on that.



Thomas Burke, Albany, N.Y., Qwest technician (received 8/09/02)


Valuation Is in the Eye of the Stockholder

What Recession?

Aaron Task's story on stock valuations was great work, but he neverconsidered some serious points:

1) We're NOT in a recession, so the P/E of the Dow cannot be properlycompared to periods of recession (all the dates in the articles). Ifanything, many of the Dow components are experiencing the best of allworlds and PEAK earnings (C, HD, GM, etc, etc). And are the tech companies in a recession, or are they just adjusting to a more NORMAL, post Y2Kenvironment?

2) Many think Citigroup is undervalued at 12x earnings. However, couldthese earnings be PEAK earnings? Consider this: C was trading at $10 in1996 (incidentally when Greenspan called the markets irrationallyexuberant). Assume that C grows earnings by 12% each year and the stockprice responds accordingly. This means that the current stock price shouldbe around $22 or about 35% lower than now. The recent stock market swoonbrought C down to $24, close to fair value. No panic, no capitulation, nofear -- just good-old logic and common sense.

-- Tom Peters, chief investment officer, Stonehedge Capital Management (received 07/31/02)

P's, but No E's

How come people keep talking about P/E? Lots of tech companies don't haveE's. A fair amount of the others have fake E's. Only the P's are real. GDPnumbers keep revising (e.g. GDP in 1st Q). The stocks are the riches' games. Iguess nothing but the debt numbers is real.


Qingwen Bao (received 07/31/02)

Say What You 'Mean'

Once again, Aaron Task's common sense approach is right on -- probably. It's easy for various people to say that "today is different" for P/E's and whatever else comes to mind. There is a point to consider, however.

At various low points in the past, it would have been equally easy to say "today is different," and somebody probably did, too.

As Task pointed out, the data given are averages, and there's the old business of regression to the mean, or something. So, an average P/E of 14 is probably reasonable, and the larger the deviation from the mean, the more likely, it seems to me, that there will be a return to or near the mean.


Walter Pharr (received 07/31/02) has a revenue-sharing relationship with under which it receives a portion of the revenue from Amazon purchases by customers directed there from