re: LRCX is cheap and no one cares
Isn't it strange that up until June, the big caps (Coke and Lehman and P&G etc) were expensive and no one cared, they kept buying.
Now, lots of things are cheap (or at least a lot cheaper than in June), and no one cares, they keep on selling.
There has been a fundamental shift in sentiment, from buying the dips to selling the rallies. This is going to cause a self-sustaining pattern of lower highs, which will continue until:
1) the fundamentals improve (lower interest rates alone won't do it, we need an improvement in the profit picture, which won't happen until late 1999 at the earliest), or
2) until P/E (and P/CF, P/S) ratios are low enough that investors say, "these prices are just too ridiculously low, I have to buy no matter how scared I am". We are near or at that point in a few sectors. Those sectors are the only places an investor has any hope of making money (being long) in the next 12 months. For the overall market, the trailing P/E would have to decline from 22 to 15 (S&P 500 going from 1000 to 700). And that's assuming no recession, or only a short shallow 1990-type recession. If we have a early-1970s-type recession, the market P/E could go to 10.
Got to stop typing, I'm scaring myself. |
