RE: "What you're saying..."
1. AMAT "deserves" a valuation premium relative to most other tech stocks;
2. Ceteris paribus, AMAT "deserves" a valuation premium relative to its historical low valuations because, now, it is a stronger company compared to other semi-equips and chips are a larger part of the economy and will grow even larger.
3. Statements 1. and 2. do NOT make AMAT's prices "immune" to the effects of the economy. I believe AMAT's price is appropriate for the current economy and the generally accepted view that the economy will continue to improve and technology will follow, albeit more slowly for a while.
4. You are posing an economic scenario characterized by words such as "scared" and "cracks". That sounds worse than any economy I have witnessed in my lifetime. I am not "saying" that AMAT's price will hold at any level in this kind of environment.
5. I don't agree with your "basic reasoning". You have bought into the "deflationary" recession idea. I see monetary (rates and liquidity) and fiscal policy being used with abandon to keep the economy going through the 2004 election. With tons of money floating about, stocks and real estate will benefit. We will pay the piper only if and when it becomes evident that inflation threatens to get out of control. I don't see "scared" consumers. I don't see "scared" lenders. Marginal behavior will reflect debt levels, employment levels, rates, and liquidity, but I don't see any Japanese or Great Depression type "doom and gloom." I think the American people have shown great resiliency in the face of the effects of the bubble, the 9/11 attack, and a new war on terrorism. I will not bet the farm against your scenario, but I am even less comfortable betting the farm on it. |
