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Safe Money Report

March 6, 2001

Oversold? Not By A Long Shot!

As we point out in this month's issue of Safe Money, the Nasdaq-100 is still grossly overvalued -- trading at roughly 1,400 times earnings. Today's rally means only one thing -- an opportunity to sell your stocks with a little bit less of a loss. If you're out of the market already, it's an opportunity to short stocks and clean up when the Nasdaq tanks again.

Investors are trying to breathe new life into the Nasdaq this week, but ultimately they'll see that it's like watering dead flowers -- there's little chance of revival. Earnings expectations are still being revised downward despite already gloomy forecasts. And companies haven't even begun to reveal how the economy's slowdown will affect earnings later in the year. Those revelations will shake the market in the months ahead.

Plus, we haven't seen the end of corporate bankruptcies. Companies have piled on debt over the years, either to finance growth or to buy back their own shares. Now it's clear that there has been little growth and their stock investments are in the cellar. All that's left is a mountain of debt and loan payments coming due. And many of these debt-laden companies will fold.

So, the support of investor confidence will be disappearing just as the weight of bankruptcies piles onto the markets. The combination should cause stocks to fall like a ton of bricks out a Wall Street window, and they'll land with a tremendous crash.

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