To: Dipy who wrote (10533)
From: Stock Operator
Thursday, May 25, 2000 5:34 PM ET
Reply # of 10534
Dipy, I have been a noted bear and contrarian on Silicon Investor for a while now, but even I cannot agree with
your assessment. Briefly, my thesis was that Oct - Jan was caused by an influx of liquidity due to lax Fed policy
prior to Y2k and that Jan - March was a short squeeze with many hedge funds thinking belated tax selling would
kill the markets and bonus money flowing in.
If the Fed hikes 50 basis points more we hit 2900 and begin a slow and arduous rally which takes us to 3500 by
Q1 2000. If the Fed hikes a 100 basis points, we go to 2600 MAXIMUM, and 3300 Q1 2001.
By that time the economy will have slowed to a creep. Monetary policy is more powerful during times of low fiscal
debt - and these are the times we are in. This was evident when the Fed increased liquidity prior to Y2k hence
causing our above normal growth. It will also be evident in the reverse, after the interest rate hikes take affect and
liquidity is siphoned off.
The Great Depression was caused by worldwide economic mismanagement, not by the stock market crash. Never
before has the world been so efficient and open with its markets.
Instead of looking at PE's I think you should focus on PEG's and future PEG's. Surely Disney's 70x PE was
unjustified because it wasn't even growing at 20%. Today's tech companies are much more dynamic then
yesterday's goliaths.
Another thing. Many companies on the NYSE are still quite undervalued, so much of this Nasdaq money will flow
into retailers, transports, and other beaten down sectors.
All in all, it's a great period of expansion for the world. I fully believe we are no better or worse off than we were
prior to October 1999, when this amazing expansion of multiples took place. Thus, we should simply go back to
the levels we were at prior to October: 2600-2900 and we should resume a normal pattern of growth for
technology stocks - 30% /year.
JMHO of course! |
