Duane:
> How do you feel about the market here, old friend... and LSI?
Well, after so many years of being in the market I have come to believe that I am absolutely and totally confused with the way this market is behaving in the very short tem! Overall I continue to be extremley bullish both on the overall market (and especially high techs and especially on LSI). My reasons:
1. The overblown situation in SE Asia if true will be extremly great news for US high techs and financial firms in 2 ways:
First because of the desperate mood of the SE financial firms, US financial firms (e.g. Citi Corp, Bank of America, etc.) will simply assimilate such financial firms by buying them out at bargain prices! Similarly the same situation may happen with high techs as US rich and powerful high techs such as INTC, DELL, CPQ, SUNW, etc. may end up buying the high tech companies in the SE Asia region that are in trouble (and are either their competitors or provide components to their products) at real cheap bargain prices. This way not only they assimilate their possible competitors, but also expand their production and manufacturing base costs oversees. Thus lowering their cost of production (thanks to all the devaluations in currency that has taken place).
Secondly I think high techs will enjoy a really nice growth in demands of their products by these countries. In a world where peace has replaced cold wars (and hot wars for that matter), the only way to get out of an economic slowdown/recession is through increase in productivity. And how else can one increase productivity but through technology?!
2. The availability of consumer products (high techs and non high techs) at cheap prices (again thanks to the SE Asian problems) may cause a temporary huge trade deficite for the US (as SE Asian countries will be exporting everything they have to the US market to make a buck). However this trade deficite will keep the domestic inflation very low and as a result interest rates will stay the same (or perhaps become even lower). While it is argued that US coporations may lose their momentum in earnings I think on the contrary their earnings will continue to rise very nicely. Reasons: Their production costs will be reduced dramatically (if they are successful in taking advantage of the oversees problems and expand their production and manufacturing costs in those regions). Even if the demand for high tech products decrease (a very highly unlikely situation IMHO as I stated earlier), the reduction in the production cost should neutralize any decline in the demand.
3. Unemployment is at its all time low. With more people working and making more money the perception is that they will be spending more causing inflation. However I think on the contrary, first of all because of the reasons I mentioned earlier the inflation will remain extrmely low, and secondly the saving and investment mentality is rulling the minds of the employed population! And how can possibly people spend more in such an environment? There will of course be inflation in the stock market (as a result of this mentality), however I strongly believe the companies will continue to deliver the high expectations to support their perhaps over priced valuations (again due to low inflations, low interest rates and strong demand globally).
For now I just want to be able to get my hands on more of LSI shares in the $22-$23 range (or even lower). LSI continues to be my second largest portfolio holding. I am hoping to retire in 2 years and for that to happen I do need to load up more on stocks such as LSI. Despite the fact that it makes me really (in fact extremly happy) to see LSI goes up from this point (with each 1/8 move upward and my bottom line portfolio increases in value dramatically), however I want to get one more chance to buy as many shares of LSI as my available cash allows me (but near their bottom price).
Sorry for this to get a bit long. I'll appreciate your thoughts on the market and LSI.
Best Regards,
Addi Jamshidi |
