Unfortunately, there's more of the same coming down the pike in my opinion. The market has already priced a 50 basis point interest rate reduction into many stocks. If that doesn't come to pass at the next FOMC meeting, then I think stocks will quickly tank further, including many of the so-called defensive stocks. We'll wait and see though.
Intel and Cisco warned again this week. My thoughts are that the tech wreck will not recover anytime soon. This is looking more and more like '74 all over again. I had originally thought that tech might start to recover in the beginning of fiscal 2002, but now I'm leaning very strongly to "no way, Jose". Way too many CEO's using the "no visibility" clause. These guys are not dummies. They know very well if things look good or bad. Saying "no visibility" is telling me that they see no light at the end of the tunnel yet. They don't even know how far into the tunnel they currently are. CAPEX budgets are being slashed everywhere. Overall Internet usage is down. No pressing needs to increase bandwidth or access speeds. I'd guess that we're looking at maybe 2003 or later before any significant recovery takes place, tax cuts and interest rate cuts included.
I think that this economic virus is about to spread to Europe and Asia. Japan is in very dire economic straits right now. Very near a full blown depression. The government is in truly awful financial condition. South America is very fragile right now, and ripe for "disease". Should the US problems spread, then we could very well be looking at a world wide recession. If that happens, no stock or sector or market is safe.
Right now, I wouldn't be putting any new money into any segment of the market. I saw Fleckenstein on CNBC last week, and he's as bearish as I've ever seen him. He had the exact same advice. No money in the markets. I agree with him. As bad as things are, it's really only the NASDAQ that's suffered to any great extent. My view is that the overvalued components of the DOW and the NYSE are up next on the chopping block. Just a guess, but that's how I see it.
KJC |
