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The Cash Hoards And Stagnant Stocks Of The Blue Chips

In "Blue chip blues" (Cover Story, Apr. 17) you note the record $1.5 trillion buildup of corporate cash. Many executives are dealing with the problem by paying themselves ever-increasing amounts. Perhaps the "independent" directors and "independent" compensation consultants should demand from retiring chieftains lifetime "noncompete" agreements in exchange for annual payments forever. Perpetual noncompetes could soak up a good bit of the $1.5 trillion overhang and protect shareholders from these bigger-than-life characters coming back to hurt the company.

Jerome Grossman

Glen Cove, N.Y.

Quoting earnings growth from the depressed period of 2001 to the present overemphasizes the growth that the companies quoted in your article have experienced. It is more appropriate to take a longer period or measure earnings growth from peak to peak or trough to trough, whereby investors can determine sustainable future earnings growth. When measured this way, earnings for the companies in the Standard & Poor's 500-stock index as a whole, going back to 1938, have grown 6% annually. Earnings reached 35 times forward earnings projections in 2000. Yet, stock performance lags for years once price-earnings multiples peak. Research conducted by Crestmont Research indicates that after strong periods of p-e multiple appreciation, such as we had from 1982 to 2000, multiples contract. In fact, cyclical bear markets start with a p-e multiple well above 20 times and end the slide in the single digits (1901-20, 1929-32, 1937-41, 1966-81).

Earnings multiples in the mid- to high teens for the blue chip shares would therefore drop further from here if history proves correct.

James B. Cornehlsen

Dunn Warren Investment Advisors

Greenwood Village, Colo.

I have a suggestion for the blue chip corporations on how to raise the price of their stock: Pay dividends commensurate with your earnings. Even our no-risk certificates of deposit are paying more than our ExxonMobil (XOM) stock. I read about their enormous cash reserves and fantastic earnings, but there is never an increase in our minuscule dividends.

Jeanette B. Welch

Warrensburg, Mo.

I read "Companies in the crossfire," (News: Analysis & Commentary, Apr. 17) with great interest. I, too, am one of those consumers who regulates my purchasing not only by the political bent of a company but also by where the company is based and where their products are manufactured. Our society is polarized, and companies that choose a side are at risk of alienating a substantial segment of their potential consumer base.

As a consumer and investor, I would prefer companies to be apolitical. Costco (COST) has it right by not making political contributions through a corporate political action committee. I would prefer business resources go toward better products, prices, and return on investment.

Keith Grover

Santa Fe

In "Memos to Josh Bolten" (Government, Apr. 17), Diane Brady absolutely omitted the good parts of this Presidency: the lowest-in-decades unemployment rate of 4.7%, the flourishing economy, the benefits of the much-maligned tax cuts, and the gains in democracy in Afghanistan and Iraq.

Betty Arenson

Valencia, Calif.

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