The dissenters came after the telecom stocks today (a reference to yesterday's comment)... This morning,
Morgan Stanley stated publicly what few were willing to say outside of closed doors: telecom ain't coming
back in the 2nd-half of the year. Firm identified 40 data points that suggest the macro environment
continues to weaken, service providers are spending less on network builds, and pricing pressure is
intensifying... Under firm's worst case scenario, the market does not rebound until Q3 of 2002.
Given that Morgan's comments were the most pessimistic we've heard to date on the fiber/telecom space,
it was mildly surprising that not a single firm came to the defense of the sector. Perhaps analysts did no
want to waste a reiteration/upgrade on a day that the defense would have little, if any, impact; if this proves
to be the case, likely to wake up to bullish comments on the space tomorrow morning. The other
explanation makes more sense: analysts simply had nothing to fire back with. History suggests that Morgan
Stanley is right on the money with its forecast of the downturn's length.
On a more positive note, the timing of these comments can be viewed as a positive, as they occurred at a
time many investors had been expecting a pullback in tech. Also helps to establish a new bar. Now, the
market will not be nearly as befuddled when CEOs begin to push their recovery time table into 2002,
allowing equities to recover that much sooner... Overall, we view this as a healthy retreat in a market that
had gotten ahead of itself. However, with earnings warning season approaching, and the seasonal equity
market malaise that occurs in summer just around the corner, it is difficult to make a case for being
aggressive here. We know it takes much of the fun out of the process, but successful investing requires
patience.
Briefing |
