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Thursday, August 2, 2007

Mad Money

Today I worked over Skype with a model of how to think about a company. If I started a company with $100k and invested it in my own company, paid myself 30/hour to work in it so that I don't give my time away and got earnings of 5K 10 20 40 80 in the first 5 years, what would the financial indicators that I look at on stocks show me?

Well the first year I would have a PE of 20 and if I prognosticated earnings growth of 50% the forward PE would be 10. This is a great story and would probably raise the stock price from 100 to 150.

Meanwhile I am not paying attention to my stocks and ETFC just got really dragged down to the point I need to figure out if it is time to cut loose, or buy more.

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